DEBATERS'  HANDBOOK  SERIES 


GOVERNMENT  OWNERSHIP  OF 
TELEGRAPH  AND  TELEPHONE 


DEBATERS' 
HANDBOOK  SERIES 

Enlargement  of  the  United  States  Navy 
(3d  ed.  rev.  and  enl.) 

Direct  Primaries    (3d  ed.  rev.  and  enl.) 

Capital  Punishment     (2d  ed.  rev.) 

Commission  Plan  of  Municipal  Govern- 
ment (3d  ed.  rev.  and  enl.) 

Election  of  United  States  Senators  (2d  ed. 
rev.) 

Income  Tax    (2d  ed.  rev.  and  enl. ) 

Initiative  and  Referendum  (3d  ed.  rev. 
and  enl.) 

Central  Bank  of  the  United  States 

Woman  Suffrage    (2d  ed.  rev.) 

Municipal  Ownership  (2d  ed.  rev.  and 
enl.) 

Child  Labor    (2d  ed.  rev.  and  enl.) 

Open  versus  Closed  Shop     (2d  ed.) 

Employment  of  Women 

Federal  Control  of  Interstate  Corporations 

Parcels  Post    (2d  ed.  rev.  and  enl.) 

Compulsory  Arbitration  of  Industrial  Dis- 
putes (2d  ed.  rev.  and  enl.) 

Compulsory  Insurance 

Conservation  of  Natural  Resources 

Free  Trade  vs.  Protection 

Government  Ownership  of  Railroads  (2d 
ed.  rev.  and  enl.) 

Reciprocity 

Trade  Unions 

Recall 

World  Peace 

Government  Ownership  of  Telegraph  and 
Telephone 

Single  Tax 

HANDBOOK  SERIES 

European  War 
Agricultural  Credit 

Other  titles  in  preparation 

Each  volume,  one  dollar  net 


Debaters'    Handbook   Series 


SELECTED  ARTICLES 

ON 

GOVERNMENT   OWNERSHIP    OF 
TELEGRAPH    AND    TELEPHONE 


COMPILED  BY 

KATHARINE  B.  JUDSON 


THE  H.  W.  WILSON  COMPANY 

WHITE  PLAINS,  N.  Y.  AND  NEW  YORK  CITY 

1914 


EXPLANATORY  NOTE 

This  volume  on  the  government  ownership  of  the  telegraph 
and  telephone,  like  others  of  this  series  of  Debaters'  Handbooks, 
is  primarily  for  students  and  debaters;  yet  libraries  wishing  a 
selected  bibliography  of  reasonable  length,  as  well  as  reprints  of 
recent  articles,  will  find  it  of  use.  As  explained  in  the  Intro- 
duction, statistics  prior  to  1907,  and  the  arguments  based  upon 
them,  are  so  out  of  date  that  they  have  been  included  to  only  a 
very  slight  extent. 

The  present  service  of  the  telegraph  and  telephone  systems 
is  fully  described  under  the  heading  General  Discussion,  where 
articles  discussing  government  ownership  from  all  points  of  view 
are  reprinted.  Other  articles  arguing  definitely  for  the  affirma- 
tive or  negative  have  been  placed  under  those  respective  head- 
ings, and  arranged  in  logical  rather  than  alphabetical  order.  So 
far  as  possible,  the  two  sides  have  been  balanced  as  carefully 
as  possible. 

As  is  customary  in  this  series,  the  selections  in  the  reprints 
are  given  but  in  part,  omissions  not  being  indicated.  Yet  in  no 
case  has  the  omission  included  any  sentence  or  paragraph  which 
would  misrepresent  the  point  of  view  of  the  author,  or  invalidate 
the  honesty  of  the  quotation  given. 


CONTENTS 


BRIEF 

General xi 

Periods  of  development xii 

Affirmative   xiii 

Negative   xvi 

BIBLIOGRAPHY 

General  References 

Books  and  Pamphlets xxv 

Magazines   xxix 

Affirmative  References 

Books  and  Pamphlets xxxii 

Magazines   xxxiii 

Negative  References 

Books  and  Pamphlets xxxiv 

Magazines xxxviii 

INTRODUCTION i 

GENERAL  DISCUSSION 

Government  Control  of  the  Wires Literary  Digest        5 

Russell,  Charles  T.  Some  Legal  Phases  of  the  Propo- 
sition for  Federal  Ownership  and  Operation  of  the 
Telephone 7 

Government  Ownership  of  the  Telegraph  Lines 

Bench  and  Bar  10 

American  Telephone  and  Telegraph  Company.  Compara- 
tive Table  of  First-class  Mail,  Telegraph  and  Telephone 
Traffic  12 

American  Telephone  and  Telegraph  Company.  Telephone 
Development  of  Each  City  in  Europe  with  Over 
500,000  Population,  January  I,  1913 13 

American  Telephone  and  Telegraph  Company.  Telephone 
Development — Urban  and  Rural 14 

American  Telephone  and  Telegraph  Company.  Annual 

Report,  1913  15 


viii  CONTENTS 

American    Telephone    and    Telegraph    Company.     Annual 

Report,  1910 17 

American    Telephone    and    Telegraph    Company.    Annual 

Report,  1911   18 

Two  Sides  of  the  Telephone  Discussion.  Review  of  Reviews      19 

Telephone  and  the  Subscriber Review  of  Reviews      20 

Telephone  and  the  Investor Review  of  Reviews      22 

Telephone-Telegraph  Divorce Literary  Digest      24 

Merchants'  Association  of  New  York.  Inquiry  into  Tele- 
phone Service  and  Rates  in  New  York  City 27 

Thiess,    J.    Bernard,    and    Joy,    Guy    A.     Toll    Telephone 

Practice    29 

First  Commercially  Feasible  Submarine  Telephone 

Current  Literature      31 

Collins,  Godfrey  P.     Trading  Departments  of  the  State 

Contemporary  Review      32 

Government  Telephone  in  England Literary  Digest      37 

Holcombe,  Arthur  Norman.  Public  Ownership  of  Tele- 
phones on  the  Continent  of  Europe 38 

Lusk,  Hugh  H.     Social  Welfare  in  New  Zealand 39 

AFFIRMATIVE  DISCUSSION 

Lewis,  David  John.  Government  Ownership  of  the  Tele- 
graph and  Telephone Congressional  Record  41 

United  States.  63d  Congress.  2d  Session.  Senate  Docu- 
ment No.  399.  Government  Ownership  of  Electrical 
Means  of  Communication 88 

Annual  Report  of  Postmaster  General  Albert  Sidney  Burle- 

son,  1913  115 

Martin,  John.  Our  Government's  Widespread  Socialistic 

Activities World's  Work  1 19 

Mansfield,  R.  H.  Swiss  Telegraph  and  Telephone  Con- 
ducted by  the  Government 

Monthly  Consular  and  Trade  Reports  120 

Control  of  Wireless Harper's  Weekly     122 

Purves,  T.  F.  Telephones  in  England  and  the  U.  S.  A 

British  Post  Office  Electrical  Engineers'  Journal  123 


CONTENTS  ix 

NEGATIVE  DISCUSSION 

American  Telephone  and  Telegraph  Company.  Govern- 
ment and  Private  Telegraph  and  Telephone  Utilities : 
an  Analysis  129 

Will  Uncle  Sam  Grab  the  Telephone  Wires 

. .  Current  Opinion  157 

Bethell,  F.  H.  Some  Comment  on  Government  Ownership 
of  Telephone  Properties 159 

Holcombe,  A.  H.  Public  Ownership  of  Telegraphs  and 
Telephones Quarterly  Journal  of  Economics  162 

Massie,  Walter  W.  Congress  and  Wireless  Telegraphy. . . 

Electrical  World  163 

Hadley,  Arthur  T.     Railroad  Transportation 165 

Jefferson,  Thomas.  Reprint  of  Statement  Made  in  1808... 

Baltimore  (Md.)  American  165 

United  States.  President  Taft's  Special  Message  to  Con- 
gress, February  22,  1912 166 

Wilson,  Woodrow.  Speech  before  the  Federation  of  Demo- 
cratic Clubs  in  Pennsylvania 166 

Wilson,  Woodrow.     The  State 167 

American  Telephone  and  Telegraph  Company.  Statistics 
Showing  the  Extent  to  which  Employees  under  Civil 
Service  Might  Be  Increased  by  Public  Ownership  of 
the  Telephones,  Telegraphs  and  Railways  in  the  United 
States  167 

Stewart,  James  A.     Some  Facts  about  the  Parcels  Post 168 

Lame  Duck Saturday  Evening  Post     172 

Question  of  Justice Saturday  Evening  Post     174 

New  York  Telephone  Company.  Some  Facts  Regarding 
Government  Ownership  of  Telephones 174 

Editorial Wall  Street  Journal  (New  York)     176 

Brooks,  Sydney.  Public  Ownership  Abroad 

Concerning  Municipal  Ownership  176 

Brooks,  Sydney.  Public  Ownership  Abroad 

Concerning  Municipal  Ownership  179 

New  York  Telephone  Company.  Some  Facts  Regarding 
Government  Ownership  of  Telephones 182 

What  the  English  People  Think  of  Their  National 
Telephone  182 


x  CONTENTS 

Samuel,  Postmaster  General  Herbert 

Great  Britain.  Parliamentary  Debates,  Official  Report  187 

Morton,  Mr 

Great  Britain.  Parliamentary  Debates,  Official  Report  187 

Editorial Daily  Mail  (London)     188 

Meyer,  Hugo  Richard.  Public  Ownership  and  the  Tele- 
phone in  Great  Britain 189 

New  York  Telephone  Company.  Good  Service  to  the 
Public  Is  Best  Secured  by  Government  Regulation,  not 
by  Political  Management 190 

Canada.  Government  Ownership  and  Operation  of  Tele- 
phones in  the  Province  of  Manitoba,  Canada.  Policy  of 
Government  Ownership  of  Telephones  Presented  to 
the  People  190 

Australia.  Report  of  the  Royal  Commission  on  Postal 

Service 196 

Ecuador.  Official  Report  of  the  Minister  of  Public  In- 
struction, Post  and  Telegraphs 197 

Spain.  Telegraph  Statistics  for  1911 

Le  Journal  Telegraphique  197 

Switzerland.  Message  of  the  Swiss  Federal  Council  to  the 
Federal  Assembly  197 

Citizens  and  Taxpayers  Information  League.  Some  Facts 
in  Regard  to  Municipal  Ownership 198 

New  York  Telephone  Company.  Some  Facts  Regarding 

Government  Ownership  of  Telephones 199 

Noulens,  Joseph.  France.  Official  Report  on  the  Budget 
for  Posts  and  Telegraphs 199 

New  Zealand  Has  Few  Telephones. .  .Westerly  (R.  I.)  Sun     201 

New  Zealand.     Postmaster  General's  Report 203 

Union  of  South  Africa.     Report  of  the  Postmaster  General, 

1910 203 

Union  of  South  Africa.     Report  of  the  Postmaster  General, 

1911 204 

Union  of  South  Africa.     Telegraph  Statistics  for  1911 

Le  Journal  Telegraphique    204 


BRIEF 

The  question  under  discussion  is  whether  government  owner- 
ship and  administration  would  be  preferable  to  private  owner- 
ship with  the  present  degree  of  control. 

GENERAL 

The  great  need   of  the  day  is   for   rapid   communication;   be- 
cause of 

American  energy  and  activity. 
Vast  extent  of  American  territory. 
Growth  of  international  communication. 
To  meet  this  need,   and  avoid  the  delay  of  mail  service,   we 

have  the 
Telephone. 
Telegraph. 
Cable. 
Wireless. 
The  two  methods  of  electrical  communication  especially  under 

consideration  are  the 
Telephone. 
Telegraph. 

The  importance  of  both  is  great  in 
The  home. 

The  city  dweller,  needing  supplies,i?ervice,  or  aid. 

The  isolated  farmer,  with  the  slpe  needs. 

Rapid  communication  between  separated  members  of  the 

same  family.  . 

Social  life. 

Saves  time  in  making  eifcigements. 

Saves  misunderstandings^rom  broken  engagements. 

Makes  social  communication  possible  without  leaving  the 

home. 
Community  life. 

Warnings  of  danger,  of  fire,  or  flood. 
Prompt  announcement  of  important  events. 


s,  ?erv 


xii  BRIEF 

Business  life. 

Important  transactions  settled  by  telephone,  where  speed 

is  of  greatest  importance. 

Saves  personal  time,  or  messenger  service,  to  business  men. 
National  life. 

Dissemination  of  general  news,  especially  through  news- 
papers. 

Aids  communication  between  State  or  Government  officials, 
whether  in  the  same  building,  or  across  the  continent. 
The  importance  of  the  cable  and  wireless  are  chiefly  in 
International  life. 

Aids  rapid  communication  between  governments,  in  peace 

or  in  war. 
Dissemination  of  international  news,  especially  through  the 

newspapers. 

Protection  and  convenience  to  ocean  travelers. 
Governing  the  movements  of  naval  or  commercial  vessels. 
Intercommunication  between  islands,  or  islands  and  main- 
land. 

Periods  of  Development 

Experiment. 

No  experts. 

No  standards. 

Crude  apparatus. 
Development. 

Amateurs  become  engineers. 

Improvements  are  invented. 

Public  becomes  interested. 
Expansion. 

Recognition  of  the  need  of  telephone  and  telegraph. 

Telephone  business  becomes  a  commercial  one. 

Telephone  business  becomes  scientifically  technical. 

Increasing  public  demand  for  service: 
In  cities. 
On  the  farms. 
Organization. 

Rapid  development  in  every  direction. 

Full  appreciation  by  the  public. 


BRIEF  xiii 

Business  fully  capitalized  and  organized. 

Management  in  hands  of  highly  trained  experts,  with  efficient 

staffs. 

Speed,  accuracy,  and  national  service  the  aim. 
Telephone    and    telegraph    systems    may    be    divided    into    four 

classes : 

Private  ownership,  with  practically  no  control. 
Private  ownership,  with  government  regulation. 
Government  ownership,  and  administration. 
Government    ownership,    with    private    administration,    under 

contract. 
The  United  States  now  has  a  system  of  private  ownership,  with 

a  large  degree  of  control  and  regulation  by 
The  State. 
The  federal  Government. 

AFFIRMATIVE 

The   services  performed  by  the  telephone  and  telegraph  com- 
panies of  the  United  States  are  of  a  public  nature. 
Public  services   must  be  monopolistic  in  order  to  be  efficient. 

Otherwise  such  corporations 

May  become  sufficiently  strong  to  be  independent  of  govern- 
ment. 

May  usurp  the  powers  of  government. 

May  tend  to  control  legislative  and  regulative  bodies,  who, 
therefore,  represent  the  corporations  and  not  the  people. 
May  become  a  social  menace. 
A.  private  monopoly  is  always  objectionable. 

Private  financiers  encroach  upon  the  government  domain. 
Public  utilities  too  closely  related  to  politics. 
Legislative  corruption  possible  through  corporation  bribes. 
Stock  heavily  watered. 

.    Charges  under  private  monopoly  inequitable. 
Discrimination  against  isolated  and  unprofitable  rural  districts. 
Permits  of  no  competition. 

Prices  advance  where  competition  ends. 
Charges  high  to  insure  large  profits. 

The  higher  the  price  the  greater  the  profits. 
Public  welfare  disregarded. 


2 


xiv  BRIEF 

All  monopolies  should  be  owned  by  the  Government. 

The  people  should  be  freed  from  money  making  public  service 

corporations. 
The  Government  should  take  over  the  telephone  and  telegraph 

service. 

Available  machinery  is  in  the  Post  Office  Department. 
Efficient  mail  service  a  guarantee  of  good  management,   as 

shown  by 

Rapid  collection  and  delivery  of  mail. 
Financial  ability,   as   shown  by  surplus,   through  efficient 

methods. 

Vast  extent  of  territory  covered  by  Post  Office  service : 
Profitable  for  telephone  service. 
Unprofitable  for  telephone  and  telegraph  service. 
Success  of  the  parcels  post,  which  has : 
Reduced  express  rates. 
Reduced  mail  rates  on  parcels,  while  increasing  their 

weight. 

Shown  financial  profit. 

Reduction  of  operating  costs  can  be  accomplished  through 
Use 'of  post  office  buildings,  .as  exchanges  and  telegraph 

offices. 

Avoidance  of  duplicate  offices. 
Joint  use  of  postal  employees. 
Decrease  of  general  expenses. 
Combined  use  of  telegraph  and  telephone  on  same  wires. 

Avoidance  of  duplication  of  expensive  wiring. 
Elimination  of  private  profits. 

Government  service,  furnished  at  cost,  would  make  possible 
Cheaper  rates. 

More  general  use  among  well-to-do. 
Use  among  the  poor. 
Telephone  and  telegraph  are  part  of  the  postal  system  in  all 

other  countries.     This  results  in 
Greater  use  of  telegraph  than  in  the  United  States. 
More  rapid  telegraph  service. 

English  telegraph  service  unrivalled. 

Lower  rates  on  telephone  and  telegraph  than  in  United 
States. 


BRIEF  xv 

Greater  economy  in     management,  by  joint  use  of  postal 

employees. 

Greater  amount  of  work  done  by  each  employee. 
Response  to  a  social  demand,  widespread  and  constant. 
Freedom  from  competition,  collision,  or  wasteful  duplica- 

cation. 
American   independent    and   rural   companies   wasteful 

and  deficient. 

New  Zealand  shows  margin  of  profit. 
Service  requires  a  minimum  of  technical  skill. 

For  specially  skilled  work,  call  in  private  aid. 
Would  free  the  Government  from  lobbying :  thus 
Preventing  political  corruption. 
Avoiding  political  control. 

Would  permit  rapid  and  disinterested  use  of  newest  inven- 
tions. 
Cost  of  expensive  changes  and  new  inventions  readily  met 

by  Government,  because  of 
Control  of  vast  sums  of  money. 
Freedom  from  restrictions  of  private  directors.- 
Freedom  from  necessity  to  show  earnings. 
Civil  service  an  advantage  to  the  Government. 
Permits  retention  of  tried  employees. 

Secures  experienced  and  skilful  service. 
Avoids  strikes. 
Pays  fair  wages. 

Wages  uniform  throughout  the  country. 
Wages  increased  with  tenure  of  service. 
Demands  only  reasonable  hours  of  work. 
Gives  better  conditions  of  work. 
Permits  use  of  labor-saving  devices. 
Standardization  of  work  gives  check  on  efficiency. 
Government  employment  free  from  abuses  of  private  monop- 
oly, which  are 

Favoritism  to  certain  patrons. 
Overlong  hours  of  work. 
Insanitary  conditions. 
Night  work  for  boys. 
Underpayment  for  skill  and  service  demanded. 


xvi  BRIEF 

Capital  more  easily  secured  by  Government. 
No  taxes. 
Low  interest. 
No  risks;  therefore, 

Expansion  more  easily  made. 

Increased  use  of  lines  already  built. 

Increased  building  in  rural,  sparsely  settled  districts; 

therefore, 

Greater  degree  of  social  service. 
Greater  efficiency. 
Unlimited  capital  in  times  of  emergency. 

At  vote  of  Congress,  vast  sums  ready  for  use  in  case  of 

fire,  flood,  or  danger. 

The  Government  has  the  legal  right  to  take  control  of  all  mo- 
nopolies. 
By  law  of  1866,  Government  has  the  right  to  take  possession 

of  the  telegraph  at  any  time. 

The  telephone,  in  England,  has  been  decided  to  be  a  telegraph. 
Government  should  have  control  of  all  means  of  communica- 
tion, electrical  or  otherwise. 
This   recommendation  made  by   nearly  every  Postmaster 

General. 

First  encouragement  given  to  Morse  was  by  Government. 
First  telegraph  lines  was  a  government  line. 
Inventor  Morse  recognized  propriety  of  government  own- 
ership : 

Offered  telegraph  for  sale  to  Government. 
Impossibility  of  United   States  joining  in  international  tele- 
graph tariff,  because  of  private  ownership  of  lines. 
Present  system  a  menace  in  case  of  war. 

NEGATIVE 

The  services  performed  by  the  telephone  and  telegraph  companies 

of  the  United  States  are  of  a  public  nature. 

Public  services  must  be  largely  monopolistic  in  order  to  be  effi- 
cient.   Such  monopoly  permits  of    , 
Higher  degree  of  organization. 
Development  and  employment  of  highly  trained  experts. 


BRIEF  xvii 

Greater  efficiency,  therefore 

Better  service  to  the  public. 
Greater  economy  in  management,  therefore 

Lower  rates  to  the  public. 
More    complete    control    by    state    and    interstate    regulative 

bodies. 

A  government  monopoly  is  much  more  objectionable  than  a  pri- 
vate one.  l 
Government  monopoly  must  necessarily  be  restricted  to  such 

matters  as  involve  the"  nation  as  a  whole. 
Government  may  not  interfere  with  a  state's  rights. 
Telephone  service  is  largely  within  each  state. 
Government    lacked   initiative   to   develop    telephone   or   tele- 
graph. 

Government  lack  of  prevision  is  axiomatic. 
Government  monopoly  is  an  interference  with  individual  lib- 
erties.    It  will  deaden 
Individual  initiative. 
Individual  enterprise. 
Individual  responsibility. 
Individual  accomplishment. 
Private  monopoly  follows  economic  law :  best  service  rendered 

where  there  is  hope  of  reward. 

Efficiency  and  ingenuity  stimulated  by  reasonable  profits. 
The  public  profit  by  technical  improvements. 
No  inventions  by  government  employees  to  advance  tech- 
nical development  of  departments. 

Public  ownership  throws  utilities  even  more  into  politics. 
Notorious  ^"log-rolling"  and  "pork-barrel"  methods  in  na- 
tional waterways  appropriations. 
Inherent  advantages  in  corporate  management. 
No  political  control. 

Only  sound  commercial  policy  can  meet  its  competition. 
Government  monopoly  is  a  trust,  subject  to  no  regulation. 

No  appeal  from  its  decisions. 
Privately  owned  monopoly  greater  benefit  to  public  than  same 

monopoly  state  owned,  badly  managed. 

Easier    to    bring,  privately    managed    utility    to    high    basis, 
through    Government   control   and    supervision,   than   to 


xviii  BRIEF 

raise  state  department  to  ordinary  level  of  efficiency  of 
business  corporation. 
Efficiency  of  business  corporation  is  the  ideal  standard   for 

Government  departments. 

Telephone  and  telegraph  stock  admittedly  free  of  water. 
Charges  of  privately  owned  monopoly  equitable. 
Must  give  satisfaction,  or  fail  financially. 
Must  secure  business  under   competitive  conditions. 
Governmentcljarges  inequitable. 

Charges  less  on  small  packets  than  on  letters. 
Charges  less  on  newspapers  than  magazines. 
Governmental  indifference  to  inefficiency. 

No  satisfaction  to  complaints  beyond  formal  acknowledg- 
ment. 

Complaints  against  private  monopoly  heard  and  redressed, 
free  of  cost,  by  state  or  interstate  regulating  commis- 
sions. 

Government  discrimination  in  mail  service,  in  rural  districts. 
No  mail  service  to  farms. 

Rural  mail  left  at  nearest  point  on  road. 
No  mail  delivery  in  villages. 
Such  delivery  recently  installed  and  discontinued. 
Rural  telephone  service  rapidly  expanding. 
Farmers  may  build  at  will. 
Competition  open  to  independent  lines. 

Rural  telephone,  under  government  monopoly,  closed  to  com- 
petition. 

Farmers  must  await  government  lines. 
Large  profits  prevented  by  law. 
Dividends  restricted. 

Books  always  open  to  regulating  commissions. 
Uniform  accounting  demanded  by  law. 

The  Government  should  not  take  over  the  telephone  and  tele- 
graph service. 

It  has  no  available  machinery. 
Machinery  very  simple. 

Postmen  collect,  sort,  and  deliver  mail. 
Machinery  actually  supplied  by  the  railroads. 
Privately  owned  and  efficient. 


BRIEF  xix 

It  has  no  available  space. 

Telephone  plants  need  vast  amount  of  space. 
'  Post  offices  even  now  too  small  for  own  service. 
If  possessing  space  needed  by  extensive  telephone  ser- 
vice, are  wasting  money. 

Buildings  belong  to  the  Treasury,  not  the  Post  Office. 
Telephone  and  telegraph  plants  highly  technical. 

Necessarily  built  in  centers  suitable  to  technical  work 

and  efficiency. 

Post  Office  buildings  not  in  suitable  locations. 
Post  Office  buildings  not  constructed  with  view  to  use 

of  scientific  plant. 
Would    need    expensive    alterations,    even    if    large 

enough. 

Government  mail  service  not  efficient. 
Collection  and  delivery  are  slow. 

Compare  with  rapid  English  service. 
Financial  chaos. 

Antiquated  and  confused  methods  of  accounting. 
Annual  deficits. 

Surpluses  clafmed  shown  to  be  fictitious:  gained  by 
Decreased  efficiency  in  service. 
Delayed  promotions. 
Incomplete  entries. 

Questionable  business  methods  of  parcels  post. 
Needed  no  new  machinery. 

Merely    added    heavier    parcels    to    those    already 

carried. 
No  additional  payment  to  railroads,  rural  carriers,  or 

star-route  contractors;  yet 
Immense  increase  in  small  packages. 
No  protection  against  freight  being  sent  by  mail. 
No  special  parcels  post  service  organized. 
Heavy  financial  losses  to  smaller  carriers. 

Profits  made  up  by  losses  to  individuals. 
Service  could  not  be  furnished  at  cost. 

Must  make  a  substantial  profit,  in  order  to 

Extend  new  lines,  especially  in  rural  districts . 
Build  new  plants , 


xx  BRIEF 

Install  new  improvements  rapidly. 
For  scrapping  and  depreciation. 

Government  ownership  abroad  a  serious  loss  to  the  people. 
Competition  granted  a  source  of  confusion. 
Many  governmental  restrictions. 
Short  terms  of  licences. 
Confusion  between  rival  companies. 
No  possibility  of  advance  planning. 
Heavy  royalties  demanded. 
Rates  less  satisfactory  than  American. 
"Ordinary"  rates  cheaper,  but 
Cause  great  waste  of  time. 
"Preferred"  rates  higher  than  in  United  States,  but 

Service  no  better. 
Purchasing  power  of  money  greater,  therefore  in  general, 

.Rates  no  lower  than  American. 
Rates  lower  than  cost. 

Deficit  made  up  by  taxation. 

Taxation  falls  upon  user  and  non-user  alike. 
Such  taxation  most  unjust  to  the  poor. 
Latest  appliances  lacking. 
No  advance  planning  for  future  needs. 
Inability  to  meet  present  needs. 
Untrained  and  inefficient  employees. 
Slower  service. 

Innumerable  complaints  from  people. 
Loss  of  taxation  from  private  companies. 
Hours  of  service  limited  usually  to  daylight. 

Higher  rates  for  night  service. 
Deadens  private  enterprise. 
Loss  of  efficiency. 

Red  tape ;  no  individual  responsibility. 
Loss  of  inventiveness. 

American  electrical  inventions  used  abroad. 
Electrical  directors  sent  to  study  American  methods. 
Unwillingness  to  scrap  physically  good  machinery,  to  replace 

it  with  new  inventions. 

Unwillingness  to  adopt  labor  saving  methods. 
Extravagant   administration   and   deficits. 


BRIEF  xxi 

Service  needs  a  maximum  of  technical  skill. 

Demands  experienced  body  of  men,  highly  trained. 
Needs  picked  body  of  highly  trained  assistants. 
Would  subject  Government  to  lobbying:  thus 
Increasing  political  corruption. 
Increasing  political  control. 
Would  occasion  political  danger  through  political  machine. 

Government    employees    of    all    classes    would    be   numerous 

enough  to  form  a  political  machine. 
.  Could  swing  any  close  election. 

Would  form  a  self-seeking  clique. 

Would  prevent  rapid  and  disinterested  use  of  newest  inventions. 
Great  expense  of  scrapping  machinery  physically  good :  there- 
I    fore 

Political  fear  of  charges  of  extravagance. 
Possibility  of  replacing  well-tested   invention   with  poorer 

one. 
Employees  without  technical  training,  therefore  opposed  to 

changes. 

Civil  service  a  disadvantage  to  efficient  service.  » 

Employees  secure  against  dismissal  or  punishment. 
Promotion  dependent  upon  length  of  tenure,  not  of  efficiency, 

therefore 

Constant  loss  of  efficient  and  progressive  employees. 
Retention  of  mediocre  service  only. 
Does  not  avoid  strikes. 
Wages  paid  not  relatively  well  apportioned. 

Not  varied  with  varying  cost  of  living  in  different  sections 

of  the  country. 
Uniformity  an  injustice. 

Systematic  underpayment  of  Government  to  women. 
No  damages  allowed  by  Government  for  injury  in  its  ser- 
vice, except  in  specified  work. 
No  pensions  to  employees. 
No  life  insurance. 
No  welfare  work. 
Shorter  hours  and  privileges  paid  for  by  taxation,  therefore 

By  other  workers,  of  all  classes. 
Wages  based  on  political  pressure. 


xxii  BRIEF 

Employees  prevent  use  of  labor  saving  devices 

Would  deprive  them  of  their  work. 
Private    ownership    an   advantage   to    employees. 
Wages  dependent  upon  efficiency. 

Promotion  rapid,  if  warranted. 
Pensions  paid  to  old  employees. 
Life  insurance  for  employees  provided   for. 
Damages   collectible  by  employees   for  injuries  in  any  class 

of  work. 

Hours  of  work  standard. 
Wages  based  upon  local  conditions,  therefore, 

More  just  to  the  employee. 

Employees    favor  use  of  labor-saving  machinery. 
Ingenuity  an  advantage  to  both  employee  and  company. 
Capital  less  easily  secured  by  private  monopoly. 
Must  borrow  in  the  open  market. 
Must  pay  taxes  to  states. 
Must  pay  interest. 
Must  face  risks  of  all  natures;  therefore, 

Must  hold  business  confidence  by  efficiency. 
Expand  business  systematically. 
Capital  more  readily  applied  in  emergencies. 

No  waiting  for  legislative  action,   in  time  of  fire,   flood,   or 

storm. 

Capital  borrowed  by  Government  more  easily;  therefore, 
Unnecessary  sums  borrowed. 
Looser  business  methods  of  spending. 
No  definite  plans  for  advance  construction. 
Increased  national  indebtedness. 
Leads  to  higher  rates  of  interest. 
Occasions  inefficiency. 

The  state  singularly  unfitted  to  conduct  a  business  still  in  ex- 
perimental stage. 
Telegraphy  and  telephony,  wired  and  wireless,  still  in  their 

infancy. 
Great  expense  of  paying  for  wired  system  if  new   wireless 

immediately  follows. 

Government  establishes  arbitrary  rulings   from   which  there 
is  no  appeal. 


BRIEF  xxiii 

By  government   ownership,  the   state  loses   taxes  now  paid, 

and  risks  great  deficits. 
All  deficits  must  be  met  by  tax  payer. 
The  people  are  indifferent  to  government  ownership  of  the 

telegraph  and  telephone  systems. 
Has   been  brought   into    Congress   seventeen   times,    with 

no  action  taken. 

Ideal   of   government    efficiency   is    the   efficient   private    cor- 
poration. 

The  solution  of  the  problem   is  government   regulation   and 
control  of  private  ownership  of  telegraph  and  telephone. 


BIBLIOGRAPHY 


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BIBLIOGRAPHY  xxix 

hibit  the  Giving  to  or  Receipt  by  Public  Officers  under  the 
Constitution  or  Laws  of  the  United  States  of  any  Free  Frank 
or  Privilege  for  the  Transmission  of  Messages  by  Telegraph 
or  Telephone;  to  Prevent  Discriminations  in  Interstate  Tele- 
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Regulation,  not  government  ownership. 

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World.     J.  H.  Heaton. 

Atlantic  Monthly.   97 : 263-8.   F.  '06.   Telephone  Movement :  An- 
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Mail  service  but  yet  in  its  infancy. 

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BIBLIOGRAPHY  xxxi 

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Scientific  American.   107:191.   S.  7, '12.  Telephones  in  the  United 
States  and  Europe. 
Based  on   1907  figures. 

Survey.    30:239.    My.  17,  '13.    Labor  Problem  of  the  Postoffice. 


xxxii  BIBLIOGRAPHY 

Telephony.  66:33-6.  Mr.  7,  '14.  Telephone  Growth  in  Australian 
States  and  Commonwealth ;  by  Postmaster  General  of  Aus- 
stralia. 

World's  Work.  13:8408-22.  Ja.  '07.  Communication  by  Wire 
and  "Wireless."  Arthur  W.  Page. 

*World's  Work.  16:10651-8.  S.  '08.  Our  Government's  Wide- 
spread Socialistic  Activities.  John  Martin. 

World's  Work.  19:  12726-9.  Mr.  '10.  Rulers  of  the  Wires. 
C.  M.  Keys. 

History  of  the  growth  of  the  telegraph  companies. 

World's  Work.  19:12775-8.  Ap.  '10.  Telephone  as  It  Is  Today. 
Herbert  N.  Casson. 

World's  Work.  20:  12903-18.  My.  '10.  The  Future  of  the  Tele- 
phone. Herbert  N.  Casson. 

Largely  historical. 

Yale  Review,  n.  s.  1:99-118.  O.  'n.  Postmaster  General.  H.  B. 
Learned. 

AFFIRMATIVE  REFERENCES 
Books  and  Pamphlets 

Parsons,  Frank.  Telegraph  Monopoly.  239p.  pa.  Equity  series. 
1898  Chestnut  St.,  Phila.  25c. 

Contains   some   of   the  strongest  arguments   for   government   ownership. 
Includes  several  articles  appearing  in  the  Arena  and  other  periodicals, 
1901-1904. 

United  States.  s6th  Congress,  ist  Session.  Senate  Doc.  65. 
Postal  Telegraph;  arguments  by  Frank  Parsons  and  Judge 
Walter  Clark,  p.  1-170.  75c.  'oo.  Supt.  of  Doc. 

United  States.  62d  Congress.  2d  Session.  Committee  on  Inter- 
state and  Foreign  Commerce.  Messages  of  Interstate  Tele- 
graph and  Telephone  Companies.  Time  Record  of  Receipt, 
Delivery,  etc.  Report  to  accompany  H.  R.  3010.  Ag.  2,  '12. 

United  States.  62d  Congress.  2d  Session.  House  Report  582. 
Committee  on  Merchant  Marine  and  Fisheries.  Regulation  of 
Radio  Communication.  Report  to  accompany  H.  R.  15357. 
2ip.  1912.  Supt.  of  Doc. 

United  States.  62d  Congress.  2d  Session.  Bill  H.  R.  21096,  Feb- 
ruary 29,  1912,  to  provide  for  the  condemnation,  acquisition, 
and  construction  by  the  United  States  of  America  of  telephone 
lines,  properties  and  holdings.  i6p.  pa. 


BIBLIOGRAPHY  xxxiii 

United  States.  63d  Congress,  ist  Session.  Bill  H.  R.  2867,  April 
i?»  I9I3>  to  provide  for  the  condemnation,  acquisition,  and 
construction  by  the  United  States  of  America  of  telephone 
lines,  properties  and  holdings.  i6p.  pa. 

*United  States.  63d  Congress.  2d  Session.  Senate  Doc.  399,  1914. 
Government  Ownership  of  Electrical  Means  of  Communica- 
tion :  A  Report  to  the  Postmaster  General  Prepared  by  a 
Committee  of  the  Post  Office  Department. 

Most  important. 

*United  States.  63d  Congress,  2d  Session.  Postalization  of  the 
Telephone  and  Telegraph.  By  D.  J.  Lewis,  of  Maryland,  De- 
cember, 1913.  (In  Congressional  Record,  D.  22,  "13;  also 
abridged  in  pamphlet  form  for  general  distribution.) 

Most  important. 

United  States.  International  Bureau  of  American  Republics.  Fed- 
eral Telegraph  System  of  Mexico.  Bulletin  31 :  820-1.  N.  '10, 
No.  5- 

Short  but  useful. 

*United  States.  Monthly  Consular  and  Trade  Report.  Swiss 
Telegraph  and  Telephone  Conducted  by  the  Government. 
R.  E.  Mansfield.  No.  332 :  161-162.  My.  '08. 

United  States.  Navigation  Bureau.  (Department  of  Commerce.) 
Regulations  Governing  Radio  Communication,  isp.  Jl.  i, 
'13.  Supt.  of  Doc. 

United  States.  Postoffice  Department.  Official  Statement  of 
Postmaster  General  Burleson  regarding  the  Hitchcock  Sur- 
plus. (In  morning  newspapers  of  My.  30,  '13.) 

Magazines 

Arena.  26:519-20.  N.  '01.  Why  the  Government  Should  Own 
the  Telegraph  and  Telephone.  W.  Clark. 

Arena.  27:179-87.  F.  '02.  Government  Ownership  of  the  Tele- 
phone. F.  Parsons. 

Arena.  27 :  297-302.  Mr.  '02.  Why  the  Public  Should  Own  and 
Control  the  Telephones.  F.  Parsons. 

Favors  independent  companies.     Out    of  date. 

Arena.  28 :  188-92.  Ag.  '02.  Governmental  Ownership  of  Tele- 
graph and  Telephone.  F.  Parsons. 

Century.  59 : 952-6.  Ap.  'oo.  The  Success  of  the  Government 
Telegraph  in  Great  Britain.  W.  S.  Harwood. 

Value  chiefly  historical. 


xxxiv  BIBLIOGRAPHY 

*Congressional  Record.  D.  22,  '13  [current  file],  Postalization 
of  the  Telephone  and  Telegraph.  D.  J.  Lewis. 

Most  important. 

Current,  Literature.  50:396-7.  Ap.  'n.  A  British  Postal  Expert 
on  the  United  States  Postal  Service. 

"The    United    States    possesses    a    postal    service    that    is    a    model    of 
efficiency." 

Gunton's  Magazine.  20:305-22.  Ap.  '01.  Government  Ownership 
of  Quasi-Public  Corporations. 

Independent.  63 : 460-1.  Ag.  22,  '07.  National  Ownership  of  the 
Telegraph. 

Independent.   65 :  1256.   N.  26,   '08.    The   Cables   for   the   People. 

Independent.  67:1199-1200.  N.  25,  '09.  Monopoly  a  Failure.  C. 
Warman. 

Municipal  Affairs.  6:683-700.  Winter.  '03.  Reasons  for  Public 
Ownership.  F.  Parsons. 

North  American  Review.  143 : 35-44.  Jl.  '86.  Should  the  Gov- 
ernment Own  the  Telegraph.  William  A.  Phillips. 

North  American  Review.  149:44-53.  Jl.  '89.  The  Telegraph 
Monopoly.  Richard  T.  Ely. 

Outlook.    93:640*.    N.  27,  '09.    Telegraphs  and  Telephones. 

Outlook.  96:988*-9.  D.  31,  '10.  Improved  Post-office  Manage- 
ment. 

Outlook.    98:271.  Je.  10,  'u.     Postal  Service  Waxes  Profitable. 

Outlook.  105 :  873-5.  D.  27,  '13.    Government  Telegraph. 

Telephony.  65:41-44.  S.  13,  '13.  Nebraska  Commissioner  Files 
Dissent  in  the  Lincoln  Rate  Case.  T.  L.  Hall. 

Telephony.  67:33-4.  Ag.  29,  '14.  Effects  of  the  War  on  Tele- 
phone and  Telegraph  Service. 


NEGATIVE  REFERENCES 
Books  and  Pamphlets 

Allen,  Walter  S.  Twenty-five  Reasons  why  a  Privately-owned 
Telephone  System  Is  Better  for  the  Users  than  a  System 
Owned  and  Operated  by  the  United  States  Government. 
American  Telephone  and  Telegraph  Co.,  New  York. 

American  Telephone  and  Telegraph  Company.  Brief  of  Argu- 
ments Against  Public  Ownership.  3v.  '14. 


BIBLIOGRAPHY  xxxv 

American  Telephone  and  Telegraph  Company.  Facts  and  Fig- 
ures not  to  be  Forgotten  When  the  Question  of  Government 
Ownership  is  Considered.  4p.  pa.  Distributed  with  the  Tele- 
phone News,  Mr.  15,  '14. 

American  Telephone  and  Telegraph  Co.  Government  Ownership 
and  the  Farmer.  No.  2,  in  Five  Minute  Talks  on  Government 
Ownership. 

*American  Telephone  and  Telegraph  Co.  Governmental  and 
Private  Telegraph  Utilities:  An  Analysis.  95p.  -1914- 

Analysis  of  Lewis's  speech  in  Congress.     Extensive  bibliography. 

^Australia.  Royal  Commission  Report  on  Investigation  of 
Postal,  Telegraph  and  Telephone  Service  of  Australia. 
'  [Extract.]  ;p. 

*Bethell,  Frank  H.  Some  Comment  on  Government  Ownership 
of  Telephone  Properties.  Paper  read  before  the  City 
Plan  Association  of  Albany,  N.  Y.,  February  25,  1914. 

ISP-  Pa. 

Bethell,  Frank  H.  Government  Ownership  of  Telephone  Prop- 
erties :  An  Interview,  i  ip.  pa.  New  York  Press,  February  22, 
1914. 

*Bureau  of  Public  Service  Economics.  What  the  English  People 
Think  of  Their  National  Telephone.  Special  Correspondence 
and  Selected  Letters  in  the  (London)  Times,  December,  1913. 
New  York. 

Burt,  Alonzo.  Some  of  the  Problems  of  the  Telephone  Business. 
Before  Ways  and  Means  of  Chicago  Association  of  Com- 
merce, November  26,  1913. 

*Canada.  Government  Ownership  and  Operation  of  Telephones 
in  the  Province  of  Manitoba,  Canada.  2Op.  pa.  1911. 

Canada.  Toronto  Telephone  Commission.  Report  of  Royal 
Commission  on  Dispute  Respecting  Hours  of  Employment. 
1907.  Canada.  Dept.  of  Labor.  Ottawa. 

Carty,  John  J.  Telephone  Service  in  America.  Address  at 
International  Conference  of  European  Telephone  and  Tele- 
graph Administrations,  the  Sorbonne,  Paris,  September  4  to 
n,  1910.  23p.  pa.  American  Telephone  and  Telegraph  Com- 
pany, New  York. 

*Citizens  and  Taxpayers'  Information  League,  comp.  Some 
Facts  in  Regard  to  Municipal  [and  Government]  Ownership. 
Columbus,  O. 


xxxvi  BIBLIOGRAPHY 

Fuessle,  Newton  A.    Government  Ownership  of  the  Telephone 

and  Telegraph.    29?.  pa.  Mediator  Printery,  Cleveland,  Ohio. 

1914. 
Guyot,   Ives.    Where  and  Why   Public  Ownership   Has   Failed. 

(Trans,  from  the  French  by  F.  H.  Baker.)     459?.  New  York. 

1914. 

Excellent  and  up  to  date.     Public  ownership  in  Europe. 

Hamlin,  Philip.  Dealing  Incidentally  With  Some  Phases  of 
Government  Ownership.  A  Talk  before  the  "A.  B."  Club, 
March  24,  1914.  2Op.  pa. 

Hume,  Leland.  Is  Government  Ownership  of  Public  Utilities 
Desirable  in  the  United  States?  Address  before  the  Louis- 
ville Commercial  Club,  March  12,  1914.  24p.  pa. 

Refers  to  points  in  Representative  Lewis's  speech. 

Kerr,  William  Dunton.  Public  Relations  of  Telephone  Com- 
panies; a  paper  prepared  for  the  fourteenth  annual  conven- 
tion of  the  National  Independent  Telephone  Ass'n,  held  at 
Chicago,  February  8,  9  and  10,  1911.  32p.  'n.  Chicago. 
National  Independent  Telephone  Ass'n. 

Kingsbury,  N.  C.  Who  Is  Getting  the  Fun  out  of  It?  Address 
before  the  Cleveland  Chamber  of  Commerce,  December  30, 
1913.  20p.  pa. 

Lavine,  A.  Lincoln.  Why  Governments  Fail  in  Commercial 
Enterprises:  The  Fiscal  Barrier  Between  Plan  and  Execu- 
tion. i6p.  pa.  American  Telephone  and  Telegraph  Co. 
New  York.  1914. 

Leroy-Beaulieu,  Paul.    Public  Ownership  in  France.  7p.  pa.   1913. 

Reprinted  from  North  American  Review.     197:   295-311.     Mr.    '13. 

London  Chamber  of  Commerce.  Minutes  of  Proceedings  of  a 
Deputation  from  the  London  Chamber  of  Commerce  to  the 
Right  Honorable  Herbert  Samuel,  M.  P.,  Postmaster  General, 
on  the  Subject  of  the  Telephone  Service,  July  4,  1913.  Lon- 
don Chamber  of  Commerce.  1913. 

Mannering,  Mitchell.  Government  Ownership  of  Telephones. 
8p.  pa.  Reprint  from  National  Magazine,  Boston,  July,  1914. 

Inadequacy  the   dominant  characteristic  of   all  government  owned  utili- 
ties.    Answer  to  Mr.  Lewis. 

Marchand,  H.  Government  Administration  of  Electrical  Enter- 
prises in  Germany.  Trans,  from  the  French  by  H.  F.  Baker. 
9p.  pa.  Municipal  Ownership  Publishing  Co.,  New  York. 
1914. 


BIBLIOGRAPHY  xxxvii 

*Meyer,  H.  B.  Public  Ownership  and  the  Telephone  in  Great 
Britain.  $1.50.  Macmillan.  New  York.  1907. 

Nebraska  State  Railway  Commission.  Lincoln  Telephone  and 
Telegraph  Company.  Findings  and  order  of  the  commission, 
pa.  35p.  Lincoln,  Nebraska. 

Newcomb,  H.  T.  Public  Ownership  and  the  Wage-earner.  A 
paper  presented  before  the  Section  on  Social  and  Economic 
Science,  at  Ithaca,  New  York,  July  2,  1906.  I4p.  pa.  Muni- 
cipal Ownership  Publishing  Bureau.  New  York. 

New  York  Telephone  Company.  America's  Telephone  Service 
Is  the  Model  for  the  Whole  World,  pa.  4p.  1914. 

*New  York  Telephone  Company.  "Good  Service  to  the  Public 
Is  Best  Secured  by  Government  Regulation,  not  by  Political 
Management."  4p.  pa.  1914. 

New  York  Telephone  Co.  Plans  for  Employees'  Pensions,  Dis- 
ability Benefits,  and  Death  Benefits.  May  I,  1914. 

*New  York  Telephone  Company.  Some  Facts  regarding  Gov- 
ernment Ownership  of  Telephones.  56p.  pa.  1914. 

Pratt,  Guy  H.  Government  Ownership  of  Telephones.  Address 
before  the  Annual  Convention  of  the  Iowa  Independent  Tele- 
phone Association,  March  18,  1914.  I2p.  pa. 

Sylvan,  T.  P.  Speech  in  Lewis-Sylvan  Debate  on  Government 
Ownership  of  Telephone  and  Telegraph.  Before  the  Provi- 
dence, Economic  Club,  Providence,  Rhode  Island,  April  22, 
1914.  38?.  pa.  American  Telephone  and  Telegraph  Company. 
New  York.  1914. 

Answers  Mr.  Lewis's  speech  in  Congress. 

Vail,  Theodore  N.  Telephone  Memoranda:  A  Few  Facts  and 
Opinions,  Foreign  and  Domestic.  io2p.  pa.  American  Tele- 
phone and  Telegraph  Company,  New  York.  1914. 

Webb,  Harold  L.  The  Development  of  the  Telephone  in  Europe. 
With  an  introduction  by  Harold  Cox.  ?8p.  Electrical  Press, 
London,  W.  C.  1910. 

Reprinted  from  articles  in  "Electrical  Industries." 
Very  useful.     Clear  and  fair. 

Williams,  Arthur.  Municipal  Ownership  of  Public  Utilities. 
Address  before  the  Finance  Forum  of  the  West  Side  Y.  M. 
C.  A.,  New  York,  March  23,  1914.  i6p.  pa.  Westinghouse 
Electric  &  Manufacturing  Co.  New  York.  1914. 


xxxviii  BIBLIOGRAPHY 

Magazines 

Arena.  38:329-31-  S.  '07.  How  the  New  England  Telegraph  & 
Telephone  Company  Squanders  the  People's  Money. 

Atlantic  Monthly.  96 : 644-50.  N.  '05.  Telephone  Development 
in  the  United  States.  Frederick  W.  Cobtirn. 

Atlantic  Monthly.  111:307-319.  Mr.  '13.  Public  Utilities  and 
Public  Policy.  Theodore  N.  Vail. 

Independent  initiative,   with   effective    regulation   and   control. 

*Concerning  Municipal  Ownership.  6:253-6;  277-80.  N.-D.  '13. 
Public  Ownership  Abroad.  Sydney  Brooks. 

*Contemporary  Review.  102:514-8.  O. '12.  Trading  Departments 
of  the  State.  G.  P.  Collins. 

Edinburgh  Review.  217:466-84.  Ap.  '13.  State  [England]  and 
the  Telephones. 

*Electrical  World.  51 : 609-10.  Mr.  21,  '08.  Congress  and 
Wireless  Telegraphy.  Walter  W.  Massie. 

Fortnightly.  91 : 526-41.  Mr.  '09.  Imperial  Telegraphy  at  a 
Popular  Tariff.  C.  Bright. 

Harlem  Magazine,  p.  15.  Ap.  '14.  Letter  on  Government  Own- 
ership. Charles  Blandy. 

Harper's  Weekly.  49:970-3-  Jl.  8,  '05.  Abuses  of  Our  Mail 
Service.  H.  A.  Castle. 

Leslie's  Weekly.    119:125.    Ag.  6,  '14.    Don't  Court  Disaster. 

*Literary  Digest.  44:153-4.  Ja.  27,  '12.  Government  Telephone 
in  England. 

Literary  Digest.  46:1318-20.  Je.  14,  '13.  Doubts  about  the 
Postal  Surplus. 

*Literary  Digest.  48 :  3-4.  Ja.  3,  '14.  Telephone-Telegraph  Di- 
vorce. 

London  Times.  My.  n,  12,  14,  18  and  20,  '14.  The  Story  of 
the  Telephone.  A  British-American  Invention. 

Strongly  against  government  ownership. 

Nation.     92:132-3.     F.  9,  'n.     The  Unbusinesslike  Postoffice. 
Nation.    96:  561.    Je.  5,  '13.    Postal  Service  and  the  Fiscal  Show- 
ing of  Hitchcock. 

Nineteenth  Century.  76 :  373-83.  Ag.  '14.  What  Is  Wrong  with 
the  Telephone  ?  C.  S.  Goldman. 

Severe  criticism   of   English   telephone   inefficiency,  by  chairman   of  the 
Parliamentary  Telephone  Committee. 


BIBLIOGRAPHY  xxxix 

North  American  Review.    139:51-66.    Jl.  '84.    Government  Tele- 
graph.   D.  McG.  Means. 
North  American  Review.    149 : 569-79.    N.  '89.    Are  Telegraph 

Rates  too  High?     Norvin  Green  (President  of  the  Western 

Union  Telegraph  Company). 
North  American   Review.     194:199-210,  356-66,   541-52,   737-47; 

195:496-512,  649-64.    Ag.-N.  'n;  Ap.  '12.    Aspects  of  Public 

Ownership.     Sydney  Brooks. 

Extract  reprinted  by  Bureau  of  Railway  Economics. 

Outlook.  87 :  13-4.  S.  7,  '07.   A  Check  on  Postal  Inefficiency. 

Outlook.  88 : 846-7.  Ap.  18,  '08.  Telephone  and  Government 
Regulation. 

Outlook.  94:554-5.  Mr.  12,  '10.  What  Is  the  Matter  with  the 
Postoffice  ? 

Outlook.  98:239.  Je.  3,  'u.  Government  Ownership  of  the  Tele- 
phone System  in  England. 

Outlook.    99:927*-8.    D.  23,  'n.    Progress  of  the  Postoffice. 

Outlook.  100:769.  Ap.  6,  '12.  Politics  and  the  Postoffice.  T. 
Roosevelt. 

Outlook.  104 :  232-3.  My.  31,  '13.    Postal  Deficit. 

Pacific  Telephone  Magazine.  Supplement.  Ap.  '14.  Govern- 
ment Ownership  of  Telephone  Properties.  Paper  read  before 
the  Telephone  and  Telegraph  Society  of  the  Pacific  Coast,  at 
San  Francisco,  March  28,  1914.  22p.  pa. 

Public  Service.    16:41-3.    F.  '14.    A  Political  View  of  the  Tele- 
phone and  Telegraph  Business.    William  G.  Deacon. 
Answer  to  Representative  Lewis. 

Quarterly  Journal  of  Economics.  21 :  645-50.  Ag.  '07.  Same  con- 
densed in  Review  of  Reviews.  36 : 494-5.  O.  '07.  Municipal 
Ownership  of  Telephones  in  Great  Britain.  A.  N.  Holcombe. 

Quarterly  Review.  220:134-51.  Ja.  '14.  Inter-imperial  Telegraphy. 
C.  Bright. 

Review  of  Reviews.  41 : 266-8.  Mr.  '10.  Politics  in  the  Post- 
office. 

Review  of  Reviews.  43:264-71.  Mr.  'n.  Postoffice  Department 
and  Postal  Rates. 

Saturday  Evening  Post.  186:3-4,  69-70.  Ap.  18,  '14.  Government 
Telephones.  Will  Payne. 

Saturday  Evening  Post.     186 :  14-5,  33.    Ag.  22,  '14.     More  Gov- 
ernment Mills.    Will  Payne. 
Answer  to  Postmaster-General's  report  on  electrical  communication. 


xl  BIBLJOGRAPHY 

Spectator.    110:90-91.    Ja.  18,  '13.    The  Purchase  of  the  Tele- 
phones   [England], 
Survey.  26:677-84.  Ag.  5,  '11.    Post-office  Gag.    M.  B.  Sumner. 

Poor  methods  in  managing  employees. 

Telephone  Bulletin.  Supplement.  My.  '14.  Government  Own- 
ership of  Telephones.  Innis  G.  Osborn.  9p.  pa.  New  York. 

Telephone  News.  Supplement.  F.  15,  '14.  The  Question  of 
Government  Ownership  of  the  Telephone  of  the  United 
States.  24p.  pa. 

Answers  speech   of  Mr.    Lewis. 

Telephone  News.  Supplement.  Mr.  15,  '14.  Proposed  Govern- 
ment Ownership  and  Operation  of  the  Telegraph  and  Tele- 
phone Systems  in  the  United  States.  J.  Heron  Grossman, 
jr.  Read  before  the  Pittsburgh  Telephone  Society,  March  2, 
1914,  and  the  Philadelphia  Telephone  Society,  March  18, 
1914-  35P-  pa. 

Answers  speech  of  Mr.    Lewis. 

Telephone  Review,  pp.  192-195.  Jl.  '14.  United  States  vs.  the 
World ;  or  Private  vs.  Government  Ownership.  Address  be- 
fore the  North  Board  of  Trade,  Newark,  June  10,  1914. 

Telephony.  60:367-8.  Mr.  25,  'n.  State  Supervision  of  Tele- 
phone Business.  William  J.  Lansley. 

Telephony.  66:41-4.  Ag.  I,  '14.  Government  Ownership  of  Tel- 
ephones in  Europe.  Kerr  P.  Higgins. 

Telephony.  66 : 215.  Mr.  29, '14.  Drawbacks  of  Government  Own- 
ership :  The  Man  Who  Does  not  Do  His  Best. 

Transmitter.  Supplement.  Mr.  '14.  Government  Ownership  of 
the  Telephone  and  Telegraph  Systems  as  against  Private 
Ownership.  Address  by  T.  P.  Sylvan,  before  the  Richmond, 
Va.  Telephone  Society.  42p.  pa. 

Answers  many  points  in  Mr.  Lewis's  speech. 

*  Westerly  (R.  I.)  Sun.  N.  18,  '06.  New  Zealand  Has  Few 
Telephones.  (Quoted  also  in  Municipal  Ownership,  F.  7,  '07.) 

World  To-day.  19 :  760-7.  Jl.  '10.  New  Phase  of  Municipal  Reg- 
ulation. H.  C.  Morris. 

World's  Work.  19:12643-4.  Mr.  '10.  National  Opportunity:  A 
Business  Postal  Department. 

World's  Work.  21:13978-86.  F.  'n.  Post-office:  An  Obstructive 
Monopoly.  D.  C.  Seitz. 


SELECTED  ARTICLES 

ON 

GOVERNMENT  OWNERSHIP  OF 
TELEGRAPH  AND  TELEPHONE 


INTRODUCTION 

A  vital  point  of  interest  on  such  a  subject  as  the  government 
ownership  of  telephone  and  telegraph  systems  is,  in  a  broad 
sense,  the  relative  newness  of  it.  The  original  American  law 
of  1866,  it  is  true,  provided  for  possible  government  ownership; 
and  this  question  has  been  brought  up  at  various  times  in  the 
last  forty  years,  usually  by  some  Congressman  and  not  as  a 
popular  movement,  and  has  been  dropped  through  general  indif- 
ference. Within  the  last  two  or  three  years,  however,  the  sug- 
gestion, made  this  time  by  the  Post  Office  Department,  has  come 
more  to  the  front  and  is  receiving  more  general  attention. 

What  contribute  chiefly,  however,  to  the  newness  of  the 
question,  are  the  changed  facilities  and  the  changed  methods  of 
the  past  decade.  All  means  of  electrical  communication  have, 
within  that  period,  been  revolutionized.  Not  only  have  telegraphy 
and  telephony  partially  combined  their  operations,  to  the  advan- 
tage of  all  concerned,  but  the  extension  of  their  lines  has 
covered  the  country  like  a  fisherman's  net;  and  the  wonderful 
advance  in  technical  and  mechanical  methods,  within  the  last 
five  years,  has  added  immensely  to  their  value  to  the  nation.  In 
addition  to  this,  both  wireless  telegraphy  and  wireless  telephony 
have  become  quite  generally  known;  and  submarine  telephony 
has  been  demonstrated  as  a  possibility,  though  breaking,  it  is 
claimed,  two  laws  of  electricity  heretofore  considered  funda- 
mental. 

Such  changes,  of  course,  within  such  a  short  time,  put  all 
arguments  regarding  the  ownership  of  the  telephone  and  tele- 
graph upon  quite  a  new  basis.  All  statistics  and  comparisons 
prior  to  1910,  even,  are  so  badly  out  of  date  that  the  majority 


2'  GOVERNMENT   OWNERSHIP    OF 

of  the  arguments  based  upon  such  facts  and  figures  are  not 
only  antiquated,  but  incorrect  and  illogical.  For  this  reason,  very 
little  material  prior  to  1907,  except  arguments  based  upon  general 
economic  laws,  has  been  either  cited  in  the  bibliography,  or 
reprinted  in  the  text. 

The  law  of  1866  which  gave  to  the  telegraph  companies  the 
free  right  to  follow  the  national,  or  post,  roads  of  the  United 
States,  to  use  stone,  timber,  and  other  needed  construction  mate- 
rial, without  payment,  from  government  lands — in  other  words, 
the  free  right  of  way  granted  by  the  American  Government  to 
the  telegraph,  is  in  distinct  contrast  to  the  absolute  control  taken 
of  it  in  European  countries.  To  the  telephone,  also,  free  scope 
was  given  by  the  national  Government,  though  it  had  not  the 
same  right  of  way,  especially  in  the  cities ;  yet  as  a  rule  telephone 
wires  have  been  strung  upon  telegraph  poles  throughout  the 
country,  and  the  companies  were  unrestricted  in  their  develop- 
ment. 

As  a  result  of  this  freedom  in  developing  methods  and  facili- 
ties, American  inventiveness  found  a  fascinating  field  of  experi- 
mentation and  practical  utility  in  both  telephone  and  telegraph, 
by  which  the  whole  nation  has  profited.  And  other  nations  have 
profited  by  the  results  of  this  ingenuity,  since  there  was  less 
opportunity  for  it  in  their  own  lands. 

In  Europe,  on  the  other  hand,  with  the  constant  menace  of 
war,  the  telegraph  was  early  taken  possession  of  because  of  its 
fundamental  importance  as  a  military  necessity.  The  service  in 
many  countries  is  good,  with  low  rates  which  satisfy  the  people. 
The  losses,  where  they  occur,  are  made  up,  as  are  the  postal 
deficits  in  our  own  country,  from  the  general  government  funds. 

The  telephone,  in  nearly  all  other  countries,  was  early  decided 
to  be  legally  a  form  of  the  telegraph,  and  therefore  placed  under 
government  control.  For  many  years  there  was  no  general  de- 
mand for  telephone  service,  or  for  a  particularly  efficient  service 
where  it  existed,  such  as  was  demanded  by  the  more  active  and 
rapidly-moving  American  people. 

In  America,  however,  with  its  vast  expanse  of  territory,  its 
widely  scattered  cities,  with  higher  telegraph  rates  and  slower 
delivery  service,  as  well  as  slower  mail  service,  the  telephone  has 
become  one  of  the  great  public  necessities.  Its  "inexorable  seri- 
ousness" is  what  most  impressed  a  recent  English  writer,  who 
adds,  "What  strikes  and  frightens  the  backward  European  almost 


TELEGRAPH   AND   TELEPHONE  3 

as  much  as  anything  in  the  United  States,  is  the  efficiency  and 
universality  of  the  telephone." 

So  the  problem  stands  as  to  whether  that  efficiency  can  be 
maintained,  or  even  possibly  increased,  by  government  ownership ; 
whether  inventiveness  will  cease  with  the  passing  of  private  ini- 
tiative ;  whether  lower  rates  will  mean  a  lower  standard  of  service, 
or  whether,  indeed,  rates  are  even  now  not  really  lower  than 
European  rates ;  whether  government  management  will  not  mean 
possible  deficits,  to  be  made  up  by  general  taxation,  and  whether 
government  ownership  would  mean  political  control  and  political 
inefficiency. 

Or,  whether,  on  the  other  hand,  so  important  a  commercial  and 
social  necessity  as  the  telephone  and  telegraph  should  not  be  in 
the  hands  of  the  Government,  rather  than  under  private  manage- 
ment; whether  lower  rates,  through  the  elimination  of  private 
profits,  may  not  mean  the  rapid  extension  of  such  a  necessity  into 
more  humble  homes,  and  into  lonely,  isolated  country  districts; 
whether  government  ownership  might  not  be  more  effective  than 
mere  regulation  or  control ;  and  whether  the  national  Govern- 
ment would  be  any  slower  to  adopt  new  inventions,  or  to  encour- 
age inventiveness,  than  private  corporations  have  been. 

The  problem  of  private  ownership  without  regulation  is 
practically  out  of  consideration.  There  is  already  a  large  degree 
of  control  and  regulation,  not  only  by  the  state,  but  by  the  federal 
Government. 

The  questions  involved  in  this  problem  of  government  owner- 
ship are  many  and  complex.  They  are  economic,  social,  moral, 
commercial,  scientific,  military,  touching  every  phase  of  American 
life,  in  the  city  and  in  the  country,  in  business  life  and  in  the 
home,  social  life  and  political,  as  well  as  national  and  inter- 
national. 

Because  the  question  is  so  complex,  it  has  been  especially 
important  to  present  both  sides  fairly;  yet  this  has  been  a  task 
of  peculiar  difficulty  because  the  initiative  on  this  question  has  not 
come  from  popular  opinion  but  from  the  Government  itself,  and 
the  opposition  comes  from  those  best  qualified  by  experience  and 
training  to  understand  the  highly  technical  and  scientific  points 
involved,  yet  with  private  financial  interests  to  consider.  The 
American  people,  as  a  whole,  have  not  yet  expressed  their  opin- 
ion. Yet  in  spite  of  this  difficulty,  every  effort  has  been  made  to 
present  the  question  impartially. 


GENERAL  DISCUSSION 

Literary  Digest.  47:663-4.  October  18,  1913. 

Government  Control  of  the  Wires. 

No  one  seems  startled  nowadays  by  proposals  for  government 
ownership  of  telegraphs.  Postmaster  General  Hitchcock  advo- 
cated it  officially  as  a  member  of  the  Taft  administration.  Fol- 
lowers of  newspaper  opinion  are  familiar  with  the  arguments  pro 
and  con.  But  the  rumors  of  the  Wilson  administration's  inten- 
tions in  this  direction  have  provoked  pointed  suggestions  from 
its  opponents  to  the  effect  that,  whatever  merit  the  abstract 
proposition  may  have,  the  program  as  outlined  in  the  dispatches 
has  little,  while  the  present  is  no  time  for  its  consideration. 

It  occurs  to  the  New  York  Times  (Ind.)  that  "if  the  wireless 
is  as  successful  as  its  pioneers  hope,"  the  Government's  acquire- 
ment of  wire  communications  would  be  "backing  the  wrong 
horse."  And  with  the  same  thought  in  mind,  the  Wall  Street 
Journal  exclaims:  "Great  idea  to  spend  hundreds  of  millions  of 
the  public  money  expropriating  telegraph  .wires  which  may  be 
obsolete  in  ten  years  with  the  development  of  wireless."  The 
.  reports  from  Washington  say  that  the  Government  contemplates 
the  eventual  acquisition  of  the  telegraphs  through  the  control  of 
long-distance  telephones.  As  the  New  York  Press  sums  up  the 
chief  points  of  the  rumored  program  as  given  in  the  dispatches: 

If  the  parcel  post  could  be  made  a  success  as  a  Government  operation, 
a  Government  telegraph  service  could  be  made  an  equal  success. 

If  the  telegraph  corporations  will  not  be  reasonable  in  giving  them- 
selves over  to  the  Government,  then  the  Government,  through  control  and 
operation  of  the  telephone  systems,  can  harry  the  telegraph  companies  into 
a  meek  surrender. 

While  it  would  be  an  enormous  expense  to  buy  the  telegraph  com- 
panies as  a  business  proposition,  if  the  American  systems  could  be  had  at 
bargain  rates — forced  by  competitive  attacks  of  telephone  systems  controlled 
by  the  Government — then  it  would  be  as  good  a  business  for  the  Govern- 
ment to  be  in  as  the  parcel  post  has  proved  to  be. 

It  seems  extremely  doubtful  to  the  Savannah  News  (Dem.) 
that  there  can  be  anything  in  the  story  "that  the  Government 


6  GOVERNMENT   OWNERSHIP    OF 

aims  to  get  the  telegraph  lines  by  such  a  method."  And  a  number 
of  editors  and  Washington  correspondents  note  that  this  report 
has  been  left  without  official  confirmation,  so  that  they  look  upon 
it  as  at  most  "a  feeler."  The  administration,  concludes  the 
Savannah  paper, 

May  contemplate  Government  ownership  of  the  lines,  but  if  it  does 
it  will  acquire  them  in  a  way  that  wouldn't  be  open  to  criticism. 

The  telegraph  lines  are  owned  by  many  thousands  of  people.  It 
would  be  unjust  to  render  their  property  worthless  in  order  to  get  posses- 
sion of  it.  When  all  the  facts  are  known,  it  doubtless  will  appear  that  if 
the  administration  is  planning  Government  ownership  of  the  telegraph 
lines  its  plan  includes  the  buying  of  the  lines  at  a  fair  price. 

Long  arguments  against  the  "delusive  promises"  of  govern- 
ment ownership  of  the  wires  appear  in  the  New  York  Journal  of 
Commerce  and  Times,  Brooklyn  Eagle  (Ind.  Dem.),  Philadelphia 
Public  Ledger  (Ind.),  and  Baltimore  American  (Rep.).  The  New 
York  Press  (Prog.)  takes  less  extreme  ground.  It  recognizes 
the  strength  of  the  arguments  for  public  ownership  of  the  means 
of  communication  by  wire,  saying : 

If  it  were  necessary,  for  example,  to  establish  communications  with 
or  throughout  territory  where  the  business  could  not  possibly  be  self- 
supporting,  the  Government  could  do  such  a  thing  purely  as  a  duty  to  a 
part  of  the  public,  when  private  corporations  could  not  be  expected  to  do 
the  same  thing.  And  then,  of  course,  there  is  always  the  possibility  that 
the  Government  may  require  the  exclusive  handling  of  wire  communica- 
tions for  purposes  of  war.  And  whether  we  concede  the  economic 
advantages  or  not  of  such  Government  operation,  there  is  a  certain  con- 
sistency in  maintaining  that  if  the  Government  provides  and  operates  mail 
communications,  it  ought  to  provide  and  operate  all  other  communications, 
so  as  to  have  a  correlated  whole. 

But  nobody,  the  Press  continues,  "can  extract  cold  reason 
out  of  the  proposition  that  because  the  Government  has  done  well 
with  the  parcel  post  it  could  do  as  well  with  the  telegraph  lines." 
We  are  reminded  that  in  the  one  case  it  had  all  the  necessary 
machinery  in  existence  and  in  operation ;  in  the  other,  the  whole 
service  would  have  to  be  created,  "unless  it  took  over  the  whole 
telegraph  business  as  it  stands,  with  all  the  persons  now  engaged 
in  the  telegraph  business  to  help  out  the  Government."  And  in 
this  case  the  same  results,  as  far  as  the  public  is  concerned, 
would  be  obtained  by  having  the  Government  undertake,  not  to 
own, but  "to  control  the  operation  of  the  telegraph  lines  and  to  gov- 
ern their  rates  and  the  conditions  of  their  rendering  their  service 
- — to  control  and  govern  all  this,  privately  owned  and  operated." 


TELEGRAPH   AND    TELEPHONE  7 

Some  Legal  Phases  of  the  Proposition  for  Federal  Owner- 
ship and  Operation  of  the  Telephone. 

Charles  T.  Russell. 

In  addition  to  the  economic  and  practical  objections  to  the 
scheme  of  federal  ownership  and  operation  there  is  another  side 
to  the  matter  which  its  proponents  have  either  ignored  or  failed 
to  recognize.  That  is  the  constitutional  power  of  the  federal 
Government  to  acquire  and  operate  the  telephone  properties. 

Lawyers  who  have  given  thought  and  study  to  the  matter  say 
that  there  is  a  very  serious  question  indeed  as  to  the  constitutional 
power  of  the  federal  Government  to  take  and  operate  even  the 
interstate  long  distance  telephone  lines,  and  that  they  can  find 
no  authority  whatever  by  virtue  of  which  it  can  lawfully  acquire 
or  operate  local  or  intrastate  telephone  systems. 

The  federal  Constitution  is  more  than  a  mere  series  of  legal 
rules;  it  is  a  guide  to  good  government,'  framed  by  a  body  of 
Americans  inspired  by  the  purest  and  most  patriotic  motives,  and 
probably  the  wisest  and  ablest  deliberative  body  ever  assembled. 
It  was  intended  as  a  basis  for  a  permanent  system  of  government 
and  the  principles  upon  which  it  was  founded  were  believed  by  its 
makers  to  be  eternal  and  absolutely  necessary  to  the  future  wel- 
fare of  the  American  people.  From  those  principles,  aided  by 
long  experience,  were  derived  its  notable  provisions  which  recog- 
nize and  secure  the  rights  of  localities  and  individuals.  The 
general  plan  for  the  government  of  the  Union  was  to  have  a 
centralized  power  over  such  matters  only  as  were  national  in  their 
character  and  to  leave  the  rest,  including  all  local  matters  and 
affairs,  to  the  respective  states. 

Accordingly  the  federal  Constitution  strictly  limits  the  activi- 
ties of  the  federal  Government  to  matters  concerning  which  the 
Union  as  a  whole  is  interested.  It  can  declare  and  carry  on  war 
and  make  peace;  create,  maintain  and  regulate  an  army  and 
navy;  coin  money;  provide  for  the  Post  Office  service;  grant 
patents  and  copyrights;  punish  piracies  and  offenses  against 
foreign  nations;  make  uniform  rules  of  naturalization  and 
bankruptcy;  provide  for  the  government  of  the  territories,  foreign 
possessions  and  the  District  of  Columbia;  regulate  commerce 
with  foreign  nations  and  among  the  several  states ;  raise  money 
by  taxes,  duties  and  loans  to  carry  on  the  government;  establish 
courts  and  make  such  laws  as  are  necessary  and  proper  for  those 


8  GOVERNMENT   OWNERSHIP   OF 

purposes.  All  of  the  federal  Government's  powers  are  set  forth 
in  detail  in  the  Constitution  itself. 

When  the  Constitution  was  presented  for  acceptance  it  was 
thoroughly  understood  by  the  people  of  the  thirteen  states  that 
all  the  powers  not  plainly  granted  to  the  Congress  were  reserved 
to  the  several  states.  This  was  a  matter  of  course.  The  Union 
was  a  sort  of  partnership,  and  when  a  man  enters  into  a  partner- 
ship he  retains  his  control  over  his  family  affairs  and  private 
business.  You  do  not  have  to  put  that  into  the  partnership 
papers.  Nevertheless  the  watchful  critics  of  the  Constitution 
objected  that  the  reservation  to  the  states  was  not  specifically 
made,  and  it  was  found  necessary  in  order  to  get  it  adopted  to 
promise  that  it  should  be  immediately  amended  in  this  respect. 
Consequently  at  the  very  first  Congress,  held  in  1789,  an  amend- 
ment was  proposed  and  unanimously  ratified  .by  the  states  and 
made  a  part  of  the  Constitution  in  the  following  language : 

"The  powers  not  delegated  to  the  United  States  by  the  Con- 
stitution, nor  prohibited  by  it  to  the  States,  are  reserved  to  the 
States  respectively,  or  to  the  people."  (Art.  X.) 

Nothing  could  be  plainer  than  the  meaning  of  the  language 
of  this  amendment.  Every  intelligent  man  at  all  familiar  with 
constitutional  history  knows  that  if  telephone  systems  had  been 
in  existence  at  the  time  the  Constitution  was  adopted  the  entire 
control  of  such  systems  within  the  limits  of  each  state  would 
have  been  reserved  to  that  state.  No  one  would  have  even  sug- 
gested that  they  could  be  operated  by  the  federal  Government. 

Equally  absurd  is  it  to  say  that  the  words  "post-roads"  can  be 
construed  to  mean  telephone  routes.  These  roads  belong  to  the 
states,  cities,  corporations  or  individuals  and  not  to  the  United 
States,  "and  are  declared  post-roads  only  to  prevent  the  carriers 
from  being  interfered  with,  and  the  mails  from  being  delayed  in 
their  transportation,  and  the  postal  service  from  frauds.  The 
Government  has  no  other  control  over  them."  (96  U.  S.  17.) 
They  include  waters,  canals  and  plank  roads  while  the  mail  is 
being  carried  thereon  and  all  letter-carrier  routes  in  towns  or 
cities,  and  also  railroads.  A  post-road  is  merely  a  route  on  which 
mail  is  carried. 

Some  people  may  ignorantly  say  that  the  Congress  has  made 
telegraph  routes  into  post-roads.  But  this  is  not  so.  The  mis- 
apprehension when  it  exists  arises  from  the  fact  that  in  1866,  in 


TELEGRAPH   AND   TELEPHONE  9 

order  to  aid  and  encourage  the  development  of  the  telegraph 
systems  the  Congress  passed  the  so-called  Post-Roads  Act 
(14  Stat.  221)  which  provided  in  substance  that  telegraph  com- 
panies might  with  Government  consent  construct  and  operate 
telegraph  lines  upon  the  military  and  post-roads  of  the  United 
States,  provided  they  accepted  the  condition  of  giving  preference 
over  their  lines  to  government  business  and  gave  the  Government 
an  option  to  purchase  any  lines  so  constructed.  The  companies 
had  of  course  to  get  the  additional  consent  of  the  local  authori- 
ties. This  act  when  accepted  gave  the  telegraph  companies  an 
opportunity  to  use  all  post-roads  but  did  not  convert  the  tele- 
graph lines  into  post-roads.  Moreover  the  law  very  properly 
recognizes  and  treats  the  telegraph  and  telephone  as  distinct  and 
essentially  different  institutions,  and  the  United  States  Supreme 
Court  has  directly  held  (174  U.  S.  761)  that,  a  telephone  is  not 
a  telegraph  and  that  the  provisions  of  the  Act  of  1866  did  not 
extend  to  nor  include  telephone  companies.  That  statute  is  there- 
fore of  no  importance  whatever  in  the  consideration  of  the 
effect  upon  telephone  systems  of  the  power  in  the  Congress  to 
legislate  concerning  post  offices  and  post-roads. 

This  country  is  not  a  unit  but  a  union  of  states  with  a  written 
Constitution  strictly  limiting  the  authority  of  the  central  Govern- 
ment. That  the  telephone  is  not  a  true  Post  Office  function  is, 
furthermore,  well  recognized  by  those  countries  where  the  tele- 
phone systems  are  governmentally  owned  and  operated.  In 
S.weden  the  telephone  administration  has  no  relation  whatever 
to  the  Post  Office  Department,  and  the  telephone  systems  are 
separately  administered  in  Italy,  Norway,  Denmark  and  Switzer- 
land. In  some  countries  the  government  telephones  are  admin- 
istered under  a  Department  of  Posts,  Telegraphs  and  Telephones ; 
some  under  a  Ministry  of  Public  Works,  etc.,  etc.,  but  there  is  a 
clear  distinction  made  between  telephone  operation  and  the 
ordinary  post  office  function  of  mail  carding  and  distribution. 

Assuming,  however,  that  telephoning  is  commerce  and  that 
telephone  lines  and  appurtenances  are  instruments  of  commerce, 
what  then  is  the  power  of  the  Congress  as  to  their  acquisition 
and  operation?  The  telephone  companies  are  the  creatures  of 
the  states,  and  they  are  primarily  local  in  their  nature,  manage- 
ment and  operation.  They  are  even  more  intimately  local  in 
their  nature  than  street  car  and  gas  and  electric  light  corpora- 


10  GOVERNMENT   OWNERSHIP    OF 

tions.  In  their  origin  they  were  confined  entirely  to  local  service. 
The  interstate  service  furnished  by  them  is  only  incidental  to 
and  wholly  dependent  upon  their  local  service,  without  which  it 
could  be  neither  established,  maintained  nor  supported.  In  the 
state  of  New  York  of  all  the  telephone  use  of  the  lines  of  the 
New  York  Telephone  Company  over  96  per  cent  is  purely  local, 
that  is,  entirely  between  points  within  the  state,  and  less  than  4 
per  cent  is  interstate. 


Bench  and  Bar.     28:35.     January,  1912. 
Government  Ownership  of  the  Telegraph  Lines. 

In  the  accounts  of  the  Hitchcock  episode,  or  escapade,  as  it 
might  well  be  called,  we  have  not  seen  as  yet  clear  references  to 
the  authority  under  which,  if  the  "recommendations  to  Congress" 
proposed  to  be  made  by  the  Postmaster  General  were  adopted  by 
that  body,  the  United  States  would  proceed  to  acquire  the  tele- 
graph lines,  at  a  cost  which  might  reach  the  half  billion  dollar 
mark,  if  the  figures  given  by  the  Postmaster  General  are  correct. 
Comparatively  few  lawyers,  perhaps,  are  familiar  with  the  pro- 
visions of  the  so-called  "Telegraph  Act"  of  1866,  passed  by 
Congress  a  year  after  the  termination  of  the  Civil  War.  It 
became  a  law,  therefore,  at  a  time  when  militarism  and  war 
requirements  were  vividly  in  the  public  mind,  and  so  rather 
extraordinary  concessions  were  offered  to  such  telegraph  com- 
panies as  would  organize  under  or  accept  the  provisions  of  the 
Act.  By  this  law  it  was  provided  that  any  telegraph  company, 
then,  or  thereafter  to  be,  organized  under  the  laws  of  any  state, 
should  have  the  right  to  construct  and  maintain  telegraph  lines, 
over  any  portion  of  the  public  domain  of  the  United  States,  or 
over  or  along  any  of  the  military  or  post-roads  (all  public  roads 
are  post-roads)  of  the  United  States,  and  over,  under,  or  across 
the  navigable  streams  or  waters  of  the  United  States.  In  addi- 
tion to  this  privilege,  the  companies  were  given  the  free  right  to 
take  from  any  public  lands  through  which  its  telegraph  lines 
might  pass,  the  necessary  stone,  timber,  and  other  material  for  its 
posts,  stations,  and  other  needful  uses.  In  return  for  this,  the 
companies  agreed  to  give  priority  of  transmission  to  governmental 
or  departmental  telegrams,  at  such  rate  as  might  be  fixed  by  the 
Postmaster  General,  with  the  further  proviso  that  the  United 


TELEGRAPH   AND   TELEPHONE  n 

States  might  at  any  time,  for  postal,  military  or  other  purposes, 
purchase  all  of  the  telegraph  lines,  property  and  effects  of  any  or 
all  of  the  companies  acting  under  the  provisions  of  the  Act,  at  an 
appraised  value  to  be  ascertained  by  five  competent,  disinterested 
persons,  two  of  whom  should  be  selected  by  the  Postmaster  Gen- 
eral, two  by  the  company  interested,  and  the  fifth  by  the  four  so 
previously  selected. 

It  will  be  seen,  therefore,  that  the  law  which  would  enable 
the  United  States  Government  to  carry  out  the  Postmaster  Gen- 
eral's recommendations  is  already  on  the  statute  books,  and  it 
only  remains  for  Congress  to  pass  a  simple  resolution,  and  the 
Postmaster  General  to  nominate  his  quota  of  the  appraisal  board, 
to  set  in  motion  the  existing  machinery. 

But  of  course  nothing  of  this  sort  will  be  done.  The  public 
is  not  ready  yet  for  municipal  ownership  on  so  large  a  scale,  if 
ever  it  will  be.  The  people  generally  do  not  want  it.  The 
President  knows  this.  Congress  knows  it. 


12 


GOVERNMENT   OWNERSHIP   OF 


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TELEGRAPH   AND   TELEPHONE 


American  Telephone  and  Telegraph  Company. 


Telephone    Development   of    Each    City   in    Europe   with    Over 
500,000  Population.     January  I,  1913. 

Number  Stations 

Population  of  per  100 

Stations       Population 

Amsterdam 581,000  15,953  2.7 

Barcelona    587,000  5,063  .9 

Berlin    (Exchange  Area)    2,320,000  144,543  6.2 

Birmingham  (Exchange  Area)   .   1,069,000  18,055  1.7 

Breslau    537,000  18,533  3.5 

Brussels    (Exchange   Area)    ....      838,681  21,470  2.6 

Budapest     880,000  24,567  2.8 

Cologne    541,000  23,158  4.3 

Copenhagen  (Exchange  Area)    .      608,000  50,802  8.4 

Dresden 558,000  23,728  4.3 

Glasgow  (Exchange  Area)    1,150,000  41,500  3.6 

Hamburg- Altona  (Exch.  Area)  . .  1,207,000  71,222  5.9 

Kief     506,000  4,635  .9 

Leeds  (Exchange  Area)   506,000  10,657  2.1 

Leipzig 617,000  28,245  4.6 

Liverpool  (Exchange  Area)    1,000,000  31,764  3.2 

London  (Exchange  Area)   7,280,0'00  244,320  3.4 

Lyons    547,000  7,039  1.3 

Madrid   600,000  4,031  .7 

Manchester    (Exchange   Area)..   1,200,000  29,453  2.5 

Marseilles   565,000  7,735  1.4 

Milan    599,000  10,900  1.8 

Moscow     1,533,400  43,348  2.8 

Munich    606,000  33,168  5.5 

Naples    723,000  3,600  .5 

Newcastle  (Exchange  Area)   . . .      550,000  10,980  2.0 

Odessa    505,600  6,842  1.3 

Paris    2,940,000  95,033  3.2 

Rome     539,000  10,400  2.0 

Sheffield  (Exchange  Area)   625,000  10,605  1.7 

St.  Petersburg 1,686,000  47,649  2.8 

Vienna 2,115,000  56,747  2.7 

Warsaw     872,478  28,935  3.3 

Total  of  the  above  33  European    - 

cities 36,992,159  1,184,680  3.2 

Total  of  the  11  cities  in  U.  S.      

with  over  500,000  population.  15,264,000  1,585,809  10.4 

Note:  Constantinople  excluded  from    above,    as    the    telephone    was 
not  in  operation  Jan.   1,   1913. 


GOVERNMENT   OWNERSHIP    OF 


American  Telephone  and  Telegraph  Company. 


Telephone     Development — Urban     and     Rural.     Europe     and 
United  States.     January  I,  1913. 

Stations  per 
lO'O  population. 

Outside 
of  cities 


Oper- 
ated 

by 
G 


Number  of  stations. 
Outside 
of  cities 
of  over 
100,000 


In  cities 
of  over 

100,000 
population 
.       83,404 
.       39,345 

!      1,000 


Total  U.  S. . . 


population 

77,826 

19,295 

850 

2,200 


Countries. 

Austria 

Belgium G 

Bosnia* G 

Bulgaria* G 

Denmark  (March 

31,1913) 

Finland 

France 

German  Empire. 
Great        Britain 

(March  31,  19T&- 

Greece /•  • 

Hungary j. .  • 

Italy     (June  '30, 

1912)* 

Luxemburg 

Netherlands 

Norway P.  G 

Portugal. . . 

Roumania* - 

Russia P.  G 

Servia G 

Spain* P.G 

Sweden 

Switzerland 

Other  places*... 


Total  Europe. .   P.  G.  2,002,944  1,692,419 


In  cities 
of  over        of  over 
100,00'Q         100,000 
population  population 
2.6  .30 

1.8  .36 

.04 
1.0  .05 


.  G. 

50,802 

67,596 

8.4 

3.10 

P. 

9,472 

25,728 

6.3 

.84 

G. 

137,018 

156,177 

2.3 

.47 

G. 

683,948 

618,724 

4.6 

1.20 

G. 

550,283 

188,455 

2.6 

.75 

G. 

854 

2,243 

.5 

.09 

G. 

25,972 

49,766 

2.6 

.25 

G. 

46,211 

42,955 

1.  Li 

.14 

G. 



3,910 



1.48 

.  G. 

42,867 

34,328 

3.0 

.74 

'.  G. 

18,903 

56,097 

7.6 

2.58 

.  G. 

6,868 

1,172 

1.1 

.02 

G. 

4,700 

16,300 

1.4 

.24 

.  G. 

167,777 

114,704 

2.0 

.09 

G. 

3,606 

.12 

.  G. 

12,475 

21,525 

.6 

.12 

.  G. 

92,695 

124,859 

17.7 

2.46 

G. 

28,350 

62,223 

6.0 

1.85 

P. 

1,880 

.03 

P.  3,027,375  5,702,217 


P. — Private   Companies 

G.— Government 

P.  G. — Private  Companies  and  Government 

*  Partly  estimated. 


3.0 


11.4 


.44 


8.17 


TELEGRAPH   AND   TELEPHONE  15 

American  Telephone  and  Telegraph  Company. 

Annual  Report,  1913. 

Subscriber  Stations 

At  the  end  of  the  year  the  number  of  stations  which  consti- 
tuted our  system  in  the  United  States  was  8,133,017,  an  increase 
of  676,943,  including  215,181  connecting  stations.  2,717,808  of 
these  were  operated  by  local,  co-operative  and  rural  independent 
companies  or  associations  having  sub-license  or  connection  con- 
tracts, so-called  connecting  companies. 

Telephone  Toll  Stations 

The  Bell  telephone  toll  lines  of  the  United  States  now  reach 
70,000  places,  from  many  of  which  a  telegraph  message  can  be 
sent.  The  extent  of  the  system  is  best  realized  by  comparison 
with  less  than  60,000  post  offices,  60,000  railroad  stations  and 
regular  telegraph  offices  at  about  25,000  places. 

Wire  Mileage 

The  total  mileage  of  wire  in  use  for  exchange  and  toll  service 
was  16,111,011  miles,  of  which  1,500,198  were  added  during  the 
year.  Of  the  total  mileage  nearly  13,800,000  miles  were  exchange 
wires,  and  over  2,300,000  toll  wires.  These  figures  do  not  include 
the  mileage  of  wire  operated  by  connecting  companies.  Of  this 
total  wire  mileage  92  per  cent  is  copper  wire.  8,817,815  miles  are 
underground,  including  543.923  miles  of  toll  wires  in  underground 
cables.  The  underground  conduits  represent  a  cost  of  $85,700,000 
and  the  cables  in  the  conduits  $95,800,000 — a  total  in  under- 
ground plant  of  $181,500,000. 

Traffic 

Including  the  traffic  over  the  long-distance  lines,  but  not  in- 
cluding connecting  companies,  the  daily  average  of  toll  connec- 
tions was  about  806,000,  and  of  exchange  connections  about 
26,431,000,  as  against  corresponding  figures  in  1912  of  738,000  and 
25,572,000;  the  total  daily  average  for  1913  reaching  27,237,000, 
or  at  the  rate  of  about  8,770,300,000  per  year. 


16  GOVERNMENT   OWNERSHIP   OF 

Traffic  of  the  United  States  and  Europe 

The  following  figures  compare  the  telephone  traffic  with  the 
two  other  branches  of  transmission  of  intelligence — the  mail  and 
the  telegraph — in  the  United  States  and  in  Europe  during  the 
year  1912: 

Europe  United  States 

Number      Per  Cent  Number      Per  Cent 

Type  of  Message              During        of  Total  During        of  Total 

1912             Europe  1912            U.  S. 
First    Class    Mail 

Matter     17,775,000,000       71.2%  10,212,000,000       39.4% 

Telegrams     388,000,000         1.5%  113,000,000        0.4% 

Telephone  Conver- 
sations            6,809,000,000       27.3%  15,600,000,000       60.2% 


Total    24,972,000,000     100.0%  25,925,000,000     100.0% 

In  other  words,  although  Europe  has  about  three  and  a  half 
times  the  telegraph  traffic  of  the  United  States,  and  nearly  twice 
the  first  class  mail  traffic,  it  has  only  two-fifths  the  telephone 
traffic  of  the  United  States. 

The  use  of  the  telegraph  in  Europe  was  about  2  per  cent  of 
the  mails,  while  in  the  United  States  it  was  but  I  per  cent,  the 
greater  efficiency  and  distribution  of  the  telephone  causing  the 
difference. 

Plant  Additions 

The  amount  added  to  plant  and  real  estate  by  all  the  com- 
panies, excluding  connecting  companies,  constituting  our  system 
in  the  United  States  during  the  year  1913  was  $54,871,856,  dis- 
tributed as  follows: — 

Real   Estate $  6,109,675 

Equipment 16,419,143 

Exchange  Lines  23,461,226 

Toil  Lines   ; 8.803,441 

Construction  Work  in  Progress  and  Undistributed 

Plant   78,371 


$54,871,856 

Plant  Additions  of  Previous  Years 
The  amounts  added  in  fourteen  years  have  been  as  follows : — 

1900...                   ,  $31,619,100  1907...                   ,  $52,921,400 

1901 31.005,400  1908 26,637,200 

1902 37,336,500  1909 28,700,100 

1903 35,368,700  1910 53,582,800 

1904 33,436,700  1911 55,660,700 

1905 50,780,900  1912 75,626,900 

1906 79,366,900  1913 54,871,900 

making  a  total  for  the  fourteen  years  of  $646,915,200. 


TELEGRAPH   AND   TELEPHONE  17 

Construction  for  the  Current  Year 

Estimates  of  all  the  associated  operating  companies  and  of 
the  American  Telephone  and  Telegraph  Company  for  all  new 
construction  requirements  in  1914  have  been  prepared.  It  is 
estimated  that  .about  $56,000,000  will  be  required  for  current 
additions  to  plant  in  1914. 

Maintenance  and  Reconstruction 

During  the  year  $70,183,000  was  applied  out  of  revenue  to 
maintenance  and  reconstruction  purposes;  of  this,  over  $13,000,000 
was  unexpended  for  those  purposes. 

The  total  provision  for  maintenance  and  reconstruction 
charged  against  revenue  for  the  last  ten  years  was  .over 
$457,000,000. 

American  Telephone  and  Telegraph  Company. 

Annual   Report,    1910. 

The  telephone  business  is  unique  in  that  it  supplies  its  own 
terminals,  which  are  vast  in  number,  are  temporary  in  character, 
and  call  $or  large  investment,  unique  in  that  a  very  considerable 
part  of  its  plant  is  of  a  rapidly  deteriorating  character.  Under- 
ground conduits  and  cables  and  aerial  cables  are  fast  chang- 
ing this,  but  in  the  outlying  rural  and  semi-urban  districts  and 
for  long-distance  lines  construction  will  always  have  to  be 
overhead  on  poles.  There  is  nothing  analogous  to  it  in  industrial 
or  public  utility  service  except  the  telegraph. 

The  entire  disregard  or  underestimating  of  depreciation  and 
future  replacement,  is  the  cause  of  nearly  all  the  financial  dis- 
asters that  have  occurred  in  the  telephone  business,  and  has  been 
the  common  failing  of  newcomers  in  the  telephone  field  from  the 
beginning  to  the  present  time.  • 

Current  repairs  on  new  plant,  even  of  the  old  time  temporary 
character,  were  small;  no  surplus  or  reserve  was  provided; 
profits  were  apparently  large,  as  were  dividends. 

A  false  atmosphere  of  prosperity  surrounded  the  business 
which  was  not  dispelled  until  replacements  of  plant  through 
decay  or  obsolescence  became  imperative ;  until  the  overhead 
gave  way  to  the  underground,  until  the  individual  board  gave 


i8  GOVERNMENT   OWNERSHIP    OF 

way  to  the  multiple  central  office  system,  until  central  office 
energy  supplanted  the  magneto  system,  until  exacting  construc- 
tion requirements  of  long-distance  speaking  began,  until  expan- 
sion of  business  and  extension  into  new  fields,  some  unremuner- 
ative,  were  obligatory;  until  a  condition  existed  where,  to  cor- 
rect mistakes  of  the  past,  capital  had  to  be  expended  without 
producing  any  corresponding  increase  in  the  revenue. 

The  inevitable  was  in  some  cases  postponed  by  excessive 
charges  to  construction  account,  but  came  in  time,  as  it  is  bound 
to  come  under  such  conditions.  The  apparent  profits  and  divi- 
dends had  been  at  the  cost  of  the  capital  and,  at  the  time  of  the 
greatest  necessity,  resources  were  at  the  lowest  ebb. 

Ignorantly  or  wilfully,  every  cause  but  the  right  cause  was 
blamed,  and  although  the  management  had  been  in  the  hands  of 
the  outside  interests,  the  Bell  parent  company  was  given  the 
responsibility,  had  to  carry  the  burden,  and  assume  the  work  of 
reconstruction  and  rehabilitation. 


American  Telephone  and  Telegraph  Company. 

Annual    Report,    1911. 

Telephone  rates  have  fluctuated.  Beginning  with  simple  and 
crude  instrumentalities  and  methods,  with  small  developments, 
the  rates  were  low.  As  facilities  increased,  as  methods  and 
apparatus  improved,  and  apparatus  almost  new  and  hardly  in 
use  had  to  be  discarded  to  make  place  for  new  and  improved 
methods,  rates  had  to  be  increased. 

In  the  New  York  City  exchanges,  apparatus  and  plant  prac- 
tically good  as  new  to  the  value  of  over  eight  and  one-half 
millions  of  dollars,  have  been  discarded  Because  new  improve- 
ments had  made  them  obsolete,  nearly  all  between  the  years  1883 
and  1902,  and  the  same  is  relatively  true  of  any  exchange  system. 
As  methods,  plant  and  apparatus  became  more  fixed  and  perma- 
nent, methods  of  operating  improved,  operating  expenses  declined, 
and  reductions  in  rates  followed — not  because  of  competition. 

Telephone  service  in  its  close  personal  touch  with  every 
subscriber  is  a  unique  service,  different  from  all  other  public 
services;  efficient  service  requires  the  co-operation  of  the  user, 
it  requires  prompt  attention  on  the  part  of  the  public. 


TELEGRAPH   AND   TELEPHONE  19 

In  every  use  of  the  telephone  system  three  human  factors  are 
brought  into  action — one  at  each  end,  one  or  both  anxious  and 
probably  impatient,  the  one  at  the  central  office,  as  nearly  a  ma- 
chine as  is  possible,  a  trained  expert  with  at  least  as  much  intel- 
ligence and  reliability  as  the  best  stenographers,  typewriters  or 
bookkeepers.  This  central  office  factor  is  the  personal  servant 
for  the  time  of  the  factors  at  the  end  and  is  entitled  to  the  same 
consideration  that  is  given  to  their  own  personal  staff.  Perfect 
service  depends  on  the  perfect  co-ordinate  action  of  all  of  these 
factors — any  one  failing,  the  service  fails.  This  should  never  be 
forgotten.  All  attempts  so  far  to  eliminate  the  personal  factor 
of  the  central  office,  to  make  it  a  machine,  have  failed  in  systems 
of  any  extent ;  there  are  times  when,  at  the  central  office,  action 
guided  by  intelligence,  is  absolutely  necessary. 


Review  of  Reviews.     41:  244-5.     February,  1910. 

The   Two   Sides   of  the  Telephone   Discussion. 

The  fight  was  on  last  month,  with  new  developments  and 
wider  interest  than  ever,  between  the  friends  of  the  telephone 
as  a  natural  monopoly  and  the  advocates  of  competition  in  this 
as  well  as  all  other  kinds  of  "public  service"  companies. 

From  New  York,  a  state  in  which  the  Bell  companies  are 
very  strong,  it  was  learned  that  the  Legislative  Committee,  evi- 
dence before  which  was  noticed  in  these  columns  last  month,  will 
recommend  the  control  of  telephone  and  telegraph  operations  in 
so  far  as  they  affect  the  public,  in  matters  of  rates  and  service. 
The  president  of  the  Bell  lines  had  expressed  himself  to  this 
committee,  as  on  other  occasions,  in  favor  of  public  regulation 
"if  intelligent."  Much  protest  was  made,  however,  by  many 
"independent"  telephone  companies  in  the  State,  mostly  in  the 
formative  stage,  and  in  a  position  to  be  much  hampered  by  regu- 
lation. 

Such  control  would  probably  aid  the  "Bell"  companies,  which 
are  in  a  position  to  give  better  service  than  the  others  at  present. 
Contrariwise,  it  was  stated  in  testimony  taken  in  St.  Louis  on  the 
8th  that  the  independent  telephone  companies  were  raising 
$150,000  to  oppose  absorption  by  the  big  American  Tel.  &  Tel.  of 
other  and  weaker  "independents." 


20  GOVERNMENT   OWNERSHIP    OF 

Here  is  the  view  of  the  radical  or  insurgent  citizen.  He  rep- 
resents the  spirit  of  pioneer  development,  and  scents  danger  in 
monopoly  of  any  kind.  He  insists  on  competition  with  these  as 
with  all  public  service  companies. 

Just  such  a  hot  discussion,  only  with  railroads  as  the  object, 
took  place  in  the  eighties.  Men  in  the  big  way  of  business,  with 
their  friends,  wanted  through  cars,  which  meant  fewer  different 
railroad  managements  and  companies.  Different  railroads  had 
different  gauges  and  different  stations  at  the  same  terminal  points. 
Passengers  had  to  change  cars,  and  bulk  freight  to  be  broken 
frequently.  All  this  expense,  however,  said  the  insurgents  of 
that  day,  was  a  very  small  price  to  pay  for  free  and  open  com- 
petition. Nor  did  they  trust  regulation  of  rates  and  service  by 
anybody  to  represent  the  people. 

Today  we  have  through  cars  across  the  continent, — and  the 
Interstate  Commerce  Commission. 


Review  of  Reviews.     41:  245.    February,  1910. 

The  Telephone  and  the  Subscriber. 

A  puzzling  feature  in  the  attempt  of  an  independent  telephone 
company  to  enter  New  York  City  in  competition  with  the  Bell 
lines,  some  years  ago,  was  the  contrast  between  the  testimonial 
letters  widely  advertised  by  one  company  and  those  similarly 
advertised  by  the  other. 

Scores  of  letters  from  business  men  in  localities  enjoying 
telephone  competition  were  reprinted  by  the  company  seeking 
the  franchise,  to  show  that  said  competition  had  been  beneficial 
to  the  subscriber. 

Whereas  the  Bell  company,  took  even  larger  space  in  the 
newspaper  advertising  columns,  and  reproduced  even  more  let- 
ters from  similar  business  men,  declaring  competition  to  be  an 
unmitigated  nuisance. 

The  facts  in  the  case  show  a  difference  between  rural  and 
thickly  settled  communities.  There  are  only  thirty  companies  in 
the  Bell  system.  Associated  with  these  are  7800  "independents." 
Most  of  these  are  rural  or  neighborhood  enterprises,  covering 
localities  not  densely  enough  populated  to  attract  "Bell"  invest- 


TELEGRAPH   AND   TELEPHONE  21 

ment.  Unconnected  with  the  Bell  system  are  some  16,000  more 
such  neighborhood  associations. 

Plainly  the  country  dwellers  of  the  nation  are  much  happier 
because  of  the  2,100,000  stations  operated  by  these  23,800  smaller 
companies.  They  do  not  compete  with  the  Bell  lines  as  much 
as  they  extend  them,  now  or  potentially. 

But  in  a  couple  of  hundred  communities,  mainly  in  the  Mis- 
sissippi Valley  and  the  Middle  West,  where  an  independent  com- 
pany bids  for  business  along  with  the  Bell  Company,  this  question 
has  become  very  important  and  pressing  of  late;  whether  the 
public  is  served  better  by  both  than  it  would  be  by  either  with  a 
monopoly. 

One  fact  stands  out, — that  in  nearly  all  the  cities  in-  question 
the  subscribers  to  either  of  the  systems  can  now  show  more 
telephones  per  thousand  of  whole  population  than  they  could 
before  there  was  any  competition. 

Thus  new  construction  may  have  gone  at  a  more  rapid  pace 
than  without  competition. 

But  subscribers  to  only  one  system  cannot  reach  subscribers 
to  the  other  alone.  The  figures  are  given  by  a  prominent  "inde- 
pendent" that  in  eight  of  the  largest  cities  that  have  competition 
only  twelve  out  of  each  one  hundred  users  subscribe  to  both 
telephones.  Of  the  remaining  eighty-eight,  one  portion  cannot 
reach  the  other.  They  could  be  served  more  cheaply,  other  things 
being  equal,  if  the  companies  were  combined,  with  duplicate  poles, 
wires,  instruments,  and  operators  got  rid  of. 

The  expense  of  duplication  is  the  price  of  suspicion.  Whether 
it  is  justified  or  not  will  appear  from  the  failure  or  success  of 
State  efforts  to  regulate  wire  communication. 

What  has  actually  been  done  for  the  public  of  New  York 
City  by  the  commission  to  which  it  is  proposed  to  add  control 
over  the  wires  is  shown  in  the  case  of  the  surface  cars  on  Man- 
hattan Island.  The  report  issued  on  the  i3th  of  last  month 
shows  that  these  trolley  lines,  under  orders  from  the  commission, 
increased  certain  facilities  to  passengers  by  proportions  varying 
from  II  to  57  per  cent.  Just  such  a  commission  was  advocated 
for  Ohio  on  the  3d  by  Speaker  Mooney,  of  the  General  Assembly, 
who  liked  the  way  they  do  it  in  New  York.  The  Maryland  bill 
for  a  similar  protective  body  seems  likely  to  pass  at  the  present 
session. 


22  GOVERNMENT   OWNERSHIP   OF 

Review  of  Reviews.     41:246.    February,  1910. 

The   Telephone   and  the   Investor. 

"Can  I  get  a  good  run  for  my  money  in  the  stock  of  the 
independent  'phone  company  starting  up  here, — or  had  I  better 
stick  to  the  American  Telephone  &  Telegraph  securities  ?" 

This  month  it  is  particularly  interesting  to  examine  the  facts 
of  record  disclosed  to  the  cold-blooded  investors  who  are  more 
and  more  frequently  asking  questions  like  the  above, — who  want 
so  much  per  cent  with  so  much  safety,  and  are  not  affected  by 
local,  personal,  or  political  bias. 

It  often  surprises  inquirers  from  New  England  and  other 
strongholds  of  the  Bell  companies,  to  learn  the  number  of  well- 
conducted  "independents."  Such  companies  may  be  on  a  very 
small  scale  and  yet  managed  very  conservatively.  Readers  of  the 
Review  of  eight  years  ago  this  month  recall  the  instance  of  the 
co-operative  exchange  at  Grand  Rapids.  It  had  already  grown 
to  300  subscribers,  having  started  eight  years  before  with  only 
seventy.  None  but  subscribers  were  allowed  to  hold  the  stock. 
The  company  was  prosperous  and  its  dividends  of  il/2  per  cent 
brought  the  cost  of  a  business  'phone  down  to  only  $1.50  a  month 
and  of  a  residence  'phone  to  25  cents,  as  compared  with  the  $4  and 
$3,  respectively,  that  the  Bell  Company  had  been  charging. 

Such  local  problems  have  been  met  by  local  people  and  on 
the  whole  satisfactorily  to  the  extent  of  16,000  different  com- 
panies, not  connected  in  any  way  with  the  Bell  system.  The 
average  in  this  group  is  small,  about  sixty-two  "stations."  Many 
are  mutual  associations  or  co-operations,  like  that  at  Grand 
Rapids.  They  represent  so  many  groups  of  neighbors  who  want 
to  talk  with  one  another  but  who  are  not  densely  enough  planted 
around  a  given  center  to  attract  the  attention  of  the  big  Tel.  & 
Tel.  Company.  Nor  would  they  in  most  cases  supply  many 
patrons  for  its  long-distance  lines. 

Not  so  promising  to  the  investor  is  the  group  of  about  two 
hundred  and  twenty-five  companies  averaging  half  a  million 
or  so  of  capitalization.  In  cities  like  St.  Louis  and  Kansas  City, 
such  "independents"  are  doing  business  on  a  good  scale,  paying 
dividends  and  satisfying  the  public. 

But  leaving  these  isolated  successful  territorial  groups,  one 
finds  that  nearly  10  per  cent  of  the  companies  in  the  half- 
million  dollar  average  class  have  failed  within  the  last  few 


TELEGRAPH   AND   TELEPHONE  23 

years.  About  half  of  them  have  found  that  the  business  could 
not  be  carried  on  properly  without  a  raise  of  rates,  which,  of 
course,  usually  brings  as  much  dissatisfaction  from  subscribers 
and  harassment  by  local  authorities  as  might  be  visited  upon  the 
monopoly  itself. 

Thus  heavy  disappointment  has  come  to  thousands  of  school- 
teachers, ministers,  and  others  of  limited  means,  whose  local 
loyalty  had  been  wrought  upon  by  the  promoters  of  bonds  sold 
at  a  discount  and  carrying  a  stock  bonus. 

Often  the  managers  of  the  new  company  seemed  as  ignorant 
of  telephone  science  as  the  investors.  They  found  that  they 
could  not  pay  the  high  interest  on  the  money  that  the  dis- 
counted bonds  represented  and  also  pay  dividends  on  stock 
signifying  pure  "water." 

One  obstacle  was  the  unexpected  wearing  out  of  equipment. 
Against  this  the  Bell  companies  have  learned  to  write  off  about 
6  per  cent  a  year.  Reports  from  independent  companies  do  not 
show  nearly  as  high  an  average. 

Then  peculiar  to  this  business  is  the  increasing  expense  per 
instrument  with  the  number  of  instruments  used, — just  the 
reverse  of  most  enterprises. 

Also  peculiar  is  the  impossibility  of  insuring  wires  against 
damage  by  storm,  at  a  reasonable  rate.  The  telephone  com- 
pany must  do  its  own  insuring,  must  establish  a  reserve  fund 
out  of  earnings.  The  principle  of  "averaging  risks"  makes  it 
obvious  that  the  smaller  a  company,  the  less  it  is  in  a  position 
to  insure  itself  economically. 

Here  are  the  cautions  for  the  investor  in  the  independent 
company :  Make  sure  that  the  management  is  not  interested  in 
a  construction  company  which  makes  too  large  a  profit  on  selling 
poles  and  wires  and  instruments  to  the  new  'phone  company. 
Compare  it  for  capitalization  per  station  with  established  com- 
panies. For  instance,  the  majority  of  the  larger  "independents" 
average  more  than  $200  per  station,  though  they  have  hardly 
any  of  the  expensive  long-distance  lines ;  while  the  Bell  system, 
with  456,000  miles  of  "long-distance"  wires,  averages  but  $149 
per  station.  Finally,  scan  the  allowance  for  depreciation.  To- 
gether with  operating  expenses  this  should  run  nearly  three- 
fourths  of  the  gross  earnings,  on  the  Bell  basis.  Many  of  the 
independent  companies  spend  but  $50  or  $60  per  $100  of  business 
done  on  running  and  maintaining  the  plant. 


24  GOVERNMENT   OWNERSHIP   OF 

Literary   Digest.     48:3-4.    January  3,   1914. 

The  Telephone-Telegraph  Divorce. 

Not  everybody  is  pleased  at  the  terms  of  surrender  by  which 
the  American  Telegraph  &  Telephone  Company  releases  its 
control  of  the  Western  Union  Telegraph  Company,  promises 
certain  reforms,  and  in  return  escapes  prosecution  under  the 
Sherman  Antitrust  Law,  but  most  of  the  press  join  President 
Wilson  in  expressing  gratification  over  the  agreement.  "The 
episode,"  says  the  St.  Paul  Dispatch  (Ind.),  "proves  beyond 
doubt  the  supremacy  of  the  State  over  business,  however  big; 
and,  what  is  more  to  the  point,  proves  that  corporations  are 
coming  to  realize  it."  "The  Wilson  doctrine  of  regulated  com- 
petition," remarks  the  Newark  News  (Ind.),  "has  won  a  more 
sweeping  victory  for  the  people  than  any  yet  achieved  under 
the  great  antitrust  statute — the  Sherman  Law — and  without 
resort  to  the  courts."  On  the  other  hand,  Mr.  Hearst's  New 
York  American  (Ind.),  suspecting  a  plan  to  thwart  govern- 
ment ownership  of  the  wires,  says  that  no  wonder  Theodore 
N.  Vail,  head  of  the  telephone  system,  "is  grateful  to  Attorney- 
General  McReynolds  for  suggesting  a  means  by  which  the 
great  telephone  business  would  be  saved  to  the  private  financial 
interests."  The  principal  changes  contemplated  by  the  agree- 
ment are  thus  sketched  in  the  company's  statement: 

"(i)  The  American  Telegraph  &  Telephone  Company  will 
dispose  of  its  entire  holdings  of  stock  in  the  Western  Union 
Telegraph  Company  in  such  a  way  that  the  control  and  manage- 
ment of  the  latter  will  be  entirely  independent  of  the  former 
and  of  any  other  company  in  the  Bell  system. 

"(2)  Neither  the  American  Telegraph  &  Telephone  Com- 
pany nor  any  other  company  in  the  Bell  system  will  hereafter 
acquire  control  over  any  other  competitive  line  of  exchange. 

"(3)  Arrangements  will  be  made  by  the  American  Telegraph 
&  Telephone  Company,  by  which  all  other  telephone  companies, 
including  all  independents,  may  obtain  for  their  subscribers  toll 
service  over  the  lines  of  the  Bell  system." 

This  explanation  of  the  Bell  system's  position  is  furnished 
by  President  Vail: 

"No  such  thing  as  dissolution  has  occurred,  for  the  reason 
that  no  such  thing  as  a  merger  ever  occurred  in  the  past.  The 


TELEGRAPH   AND   TELEPHONE  25 

relations  between  the  American  Telephone  &  Telegraph  Com- 
pany and  the  Western  Union  have  never  been  in  the  nature  of 
a  merger.  The  development  of  the .  mutual  relations  has  been 
of  a  complementary  character,  or  an  extension  by  each  of  the 
other's  facilities. 

"Care  has  always  been  taken  that  nothing  be  done  which 
would  affect  whatever  competition  might  be  considered  to 
exist.  The  two  services  are,  in  fact,  not  competitive;  if  there 
is  in  theory  any  competition,  it  is  because  in  some  instances 
the  use  of  one  service  may  be  an  alternative  for  the  use  of  the 
other. 

"If  a  real  merger  were  made,  and  time  given  to  complete 
the  merger,  some  economies  and  additional  new  services  of 
advantage  to  the  public  might,  be  introduced.  Whatever 'has 
been  done  already,  it  is  believed,  will  be  allowed  to  stand,  and  it 
is  probable  that  some  of  the  additional  cooperative  work  may 
yet  be  accomplished. 

"There  is  no  setback,  in  this  separation,  to  the  material 
interests  of  either  company,  but  on  the  contrary,  now  that  there 
is  some  understanding  of  what  can  be  done  and  what  can  not 
be  done,  greater  progress  along  the  lines  defined  can  be  ex- 
pected. 

"The  Attorney-General  has  been  very  considerate  of  the 
material  interests  of  the  companies,  so  far  as  consistent  with 
his  public  duty,  and  this  attitude  was  clearly  reflected  by  the 
President,  and  we  think  the  problem  has  been  worked  out  to 
the  best  interests  of  the  public  and  of  the  companies." 

For  the  benefit  of  those  who  suspect  that  the  Bell  interests 
and  the  Department  of  Justice  came  to  terms  quickly  in  order 
to  stave  off  public  ownership,  the  Columbus  Dispatch  (Ind.) 
insists  that — 

"It  is  no  victory  of  the  moment  .  .  .  either  for  the 
people  or  the  companies.  The  approach  to  it  has  been  by  hard 
marches  and  campaigns  that  seemed  almost  fruitless,  but  were 
all  the'  time  creating  a  public  opinion  before  which  monopoly 
can  not  stand  and  continue  its  extortion.  In  this  agreement  for 
a  voluntary  dissolution  there  is  a  lesson  that  other  trusts  should 
be  quick  to  learn. 

"It  may  appear  that,  with  Government  telegraph  and  tele- 
phone ownership  suggested  by  the  Administration,  the  wire 


26  GOVERNMENT   OWNERSHIP   OF 

trust  has  made  a  virtue  of  a  necessity,  but  it  has  found  a  real, 
and  not  a  sham,  virtue  at  that." 

Mr.  Munsey's  Progressive  Washington  Times  points  to  the 
night-letter  and  day-letter  service,  and  many  other  conveniences 
provided  in  the  past  few  years,  and  wonders  if  there  is  not  a 
probability  that  the  separation  of  the  two  concerns  will  hinder 
further  development: 

"The  Government  says,  not  going  any  further  into  the  mat- 
ter, that  it  has  restored  the  old  competition.  Well,  if  it  has 
restored  the  old  conditions  that  went  with  the  old  competition 
it  will  have  done  a  very  poor  day's  work  for  the  American 
people.  But  fortunately  Vail  feels  justified  in  saying  that  in 
spite  of  the  divorce — that  is  to  say,  in  spite  of  the  restoration 
of  the  old  competition — he  believes  the  improvements  and 
advantages  which  have  been  given  to  the  public  can  still  be 
preserved.  It  would  be  a  sorry  day,  we  say,  if  they  couldn't.  It 
would  be  something  to  make  us  all  gasp,  if  modern  government, 
seeking  to  do  us  good,  were  merely  driving  us  back  into  the 
Dark  Ages. 

"But  that  isn't  all  the  question.  Even  if  there  can  be  pre- 
served the  benefits  which  were  bestowed  upon  the  public  in  spite 
of  the  Government,  there  still  remains  the  question  of  whether 
— now — there  can  come  any  more.  None  of  those  benefits 
achieved  came  from  or  were  suggested  by  the  Government. 
If  it  is  possible  that  the  most  the  Government  can  do  in  this 
matter  is  to  enjoin,  in  effect,  any  more  such  improvements  and 
advantages  for  the  public — enjoining  them  by  making  it  im- 
possible for  the  genius  of  management  to  work  them  out  as 
those  others  were  worked  out — why  then  we  guess  that  the 
'great  victory'  of  the  administration  wasn't  such  a  heart- 
breaking blow  to  the  telephone  monopoly,  but  was  a  very  bad 
black  eye  to  the  American  public." 

The  St.  Paul  Dispatch  (Ind.)  takes  a  brighter  view.  It 
finds  reason  to  hope  that  the  public  will  "gain  through  the 
throwing  open  of  the  telephone  business  to  real  competition." 
And  the  Brooklyn  Eagle  (Ind.  Dem.)  offers  this  encourage- 
ment: 

"The  discrimination  by  the  telephone  interests  in  the  hand- 
ling of  telegrams  sent  out  over  the  telephone,  a  discrimination 
of  which  the  Postal  Telegraph  Company  has  persistently  and 


TELEGRAPH   AND   TELEPHONE  27 

with  justice  complained,  will  disappear.  Also,  districts  where 
independent  telephone  companies  exist  and  where  they  have 
been  hampered,  but  in  no  degree  crusht,  by  the  activities  of  the 
Bell  people,  will  obtain  toll  service  between  the  Bell  system  and 
rival  systems  upon  the  payment  of  reasonable  charges.  In  this 
concession  alone  the  telephone  interests  confer  a  public  benefit 
affecting  a  very  large  proportion  of  the  people." 


Merchants'  Association  of  New  York. 

Inquiry  into   Telephone   Service  and  Rates  in   New  York  City, 
pp.  12-17.  June,  1905. 

Inquiry  in  all  American  cities  having  a  population  of  more 
than  50,000  shows  a  wide  variation  in  the  rates  charged  for 
telephone  service.  A  superficial  view  of  the  question  of  tele- 
phone rates  is  that  a  comparison  of  such  rates  in  different 
cities  would  give  correct  deductions  as  to  the  reasonableness  of 
rates  in  any  given  city.  A  closer  examination  of  the  subject, 
however,  shows  that  such  comparisons  are  quite  deceptive.  On 
careful  consideration  of  the  whole  question,  it  becomes  evident 
that  both  the  general  conditions  and  those  peculiar  to  the  tele- 
phone business  differ  so  widely  in  different  places  that  a  bare 
comparison  of  rates  can  only  be  misleading  and  inconclusive. 
As  is  well  known,  outlays  for  labor,  rent,  taxes,  real  estate 
charges,  etc.,  vary  widely  in  different  cities  and  countries, 
those  in  America  being  much  higher  than  those  in  Europe,  and 
in  America  those  in  large  cities  much  higher  than  those  in 
small  cities.  The  subject  is  an  extremely  complex  one,  and  the 
difficulty  is  to  find  factors  in  different  places  which  are  similar, 
so  great  are  the  variations  in  almost  any  item  which  may  be 
selected  for  comparison.  For  example:  there  are  differ- 
ences in  the  quality,  range,  and  quantity  of  service  rendered, 
and  particularly  in  the  methods  of  charging  for  the  service. 
There  are  differences  also  in  the  number  of  subscribers  who 
take  different  grades  of  service. 

Another  striking  difference  in  conditions  peculiar  to  the 
telephone  business  between  large  and  small  cities  should  be 
mentioned.  In  a  small  city  a  single  central  station  suffices  for 
prompt  intercommunication  between  two  or  three  thousand 


28  GOVERNMENT   OWNERSHIP   OF 

users  or  individual  stations.  A  single  switchboard  and  single 
operator  completes  each  connection  called  for,  and  the  area 
served  being  comparatively  limited,  the  wire-mileage  is  relatively 
small.  In  large  cities  such  simple  conditions  do  not,  and  in 
the  very  nature  of  things  cannot,  exist.  For  example,  in  the 
Borough  of  Manhattan  seventeen  central  stations  are  required. 
Each  of  these  must  not  only  provide  for  intercommunication 
between  the  individual  stations  directly  attached  to  it,  (the 
average  number  being  over  8,000)  as  in  the  case  of  the  single 
central  station  in  a  small  city,  but  must  also  provide  for  prompt 
intercommunication  with  sixteen  other  central  offices  and  over 
140,000  individual  stations  outside  its  district. 

In  view  of  these  variable  factors  it  is  impossible  to  select 
any  item  of  plant,  which  may  be  intelligently  used,  in  reducing 
costs  or  charges  in  various  places  to  common  terms.  More- 
over, the  telephone  message  varies  greatly  in  cost  in  different 
places,  for  the  reason  that  the  amount  of  plant  involved,  and 
the  amount  of  labor  required  to  make  the  message  effective 
necessarily  vary,  and  therefore,  the  message  cannot  be  taken 
as  a  proper  unit  for  making  comparisons.  Indeed,  in  the 
opinion  of  the  Committee,  there  is  no  common  factor  or  unit  of 
measure  by  means  of  which,  through  comparisons  with  other 
cities,  sound  conclusions  as  to  the  reasonableness  or  unreason- 
ableness of  the  telephone  rates  in  any  given  city  can  be  reached. 
It  is  obvious  that  the  fairness  of  the  rates  of  charge  in  a  spe- 
cific city  must  be  determined  by  the  fair  cost  of  service  in 
that  city,  and  not  by  the  rates  of  other  cities  where  the  condi- 
tions are  never  identical  and  seldom  equal. 

Fair  Cost  of  Service 

The  Committee  holds  that  the  fair  cost  of  service  to  the 
consumer  should  comprehend: 

(A)  Operating  outlays   necessary  to  the  highest  efficiency, 
including  an  ample  allowance  for  replacement,  and 

(B)  A   reasonable  return  on  the  actual  investment  neces- 
sary to  fullest  efficiency  of  service,  including  a  fair  allowance 
for  contingencies. 

Careful  consideration  was  given  to  the  matter  of  depreciation 
or  replacement,  this  being,  in  the  opinion  of  the  Committee,  an 
element  of  very  great  importance  in  the  safe  management  of 


TELEGRAPH   AND   TELEPHONE  29 

telephone  investment.  Improvements  in  the  art  of  telephony 
have  been  numerous,  frequent,  and  often  radical,  and  at  rapidly 
recurring  intervals  it  has  been  necessary  to  discard,  as  obsolete, 
equipment  in  fair  physical  condition  installed  but  a  few  years 
previously  at  great  cost. 

The  telephone  business  demands  a  continuous  accession  of 
fresh  capital  to  satisfactorily  serve  the  public. 

Toll  Telephone  Practice,     pp.  11-13. 

J.  Bernard  Thiess  and  Guy  A.  Joy. 
Rural  Telephone  Equipment 

Telephone  development  in  its  early  stages  was  confined  for 
the  most  part  to  the  cities  and  large  towns.  The  growth  in 
these  communities  was  so  rapid  and  required  so  much  capital 
that  the  development  of  rural  districts  did  not  commence  until 
a  later  date.  At  the  time  the  fundamental  Bell  patents  expired 
the  keen  competition  inaugurated  by  the  independent  com- 
panies began  almost  at  once  to  stimulate  this  important  phase 
of  development. 

These  independent  companies  were  comprised,  in  a  great 
number  of  instances,  of  farmers  and  country  merchants.  As  a 
result  of  their  almost  universal  inexperience  in  building  or  oper- 
ating such  plants,  the  construction  of  the  early  rural  systems 
was  crude  in  many  respects.  The  class  of  service  expected, 
however,  was  much  below  that  necessary  to  give  satisfaction 
to  subscribers  in  urban  districts  and,  moreover,  the  necessity 
for  rigid  economy  was  frequently  imperative.  The  kind  of 
service  actually  obtained  was  usually  sufficient  to  the  needs, 
at  least  for  a  time.  Service  that  now  would  not  be  tolerated 
was  then  often  welcomed  as  of  great  benefit,  in  contrast  to 
the  entire  absence  of  any  kind  of  communication,  except  the 
telegraph,  but  a  short  time  before. 

As  a  means  of  keeping  down  the  cost  of  such  plants,  the 
farmers  often  contributed  the  poles  for  line  construction,  using 
native  timber  of  many  kinds ;  and  furthermore,  gave  extensively 
of  their  time  to  assist  in  the  work  of  construction.  The  cash 
purchases  were  usually  limited  to  switchboards,  wire  and  tele- 
phone sets.  These  conditions  contributed  to  low  cost  and  low 


30  GOVERNMENT   OWNERSHIP    OF 

rates.  If  the  service  was  imperfect  and  slow,  it  should  be 
remembered  that  a  delay  of  a  few  minutes  is  not  of  great  con- 
sequence in  business  transactions  in  such  communities,  where 
the  stress  of  city  life  is  so  little  in  evidence. 

But  conditions  as  they  were  a  decade  ago,  have  been  under- 
going a  marked  change,  and  the  increase  in  prosperity  among 
farmers,  as  well  as  their  greater  enlightenment  and  experience, 
have  produced  a  demand  for  better  service.  The  present  ten- 
dency is  toward  better  equipment  and  construction  in  most 
instances.  The  early  mistakes  necessarily  exerted  a  lingering 
influence  on  the  service,  because  they  generally  related  to  the 
construction  of  the  plant  and  were  hence  too  costly  to  be 
eliminated  until  the  approach  of  the  natural  reconstruction 
period. 

The  efficiency  of  a  plant  from  a  service  standpoint  is  largely 
settled  as  soon  as  the  construction  is  complete.  The  early 
errors  that  were  made  in  laying  out  and  building  these  plants, 
and  their  costly  effects,  may  be  observed  still  in  many  sections 
of  the  country.  The  practice  of  cooperative  construction  with- 
out regard  to  proper  methods  or  standards  is  now  widely 
recognized  to  be  undesirable.  Yet  many  hundreds  of  rural 
plants  were  built  wholly  or  partly  in  this  way.  It  was  often 
the  rule,  for  example,  to  require  country  subscribers  to  build 
their  own  lines  up  to  the  boundary  of  a  restricted  exchange 
area  or  zone,  at  which  point  the  telephone  company  or  asso- 
ciation assumed  the  construction  and  ownership  of  the  plant. 
The  type  of  line  construction  obtainable  under  this  plan  in  most 
instances  was  far  below  a  proper  standard,  owing  to  the  inex- 
perience of  those  who  built  such  lines  and  the  rigid  economy 
generally  practiced.  Thus  we  find  in  our  western  country 
some  very  crude  conditions,  such  for  example  as  barbed-wire 
fence  lines.  Even  when  fences  were  not  resorted  to,  the  charac- 
ter of  pole  lines  was  often  such  as  to  be  a  public  inconvenience, 
or  even  a  menace.  Native  timber  was  used  almost  exclusively 
and  the  bark  as  a  rule  left  on;  the  sizes  as  to  length  and 
diameter  were  extremely  irregular  in  many  cases.  Again,  the 
timber  was  sometimes  so  hard  or  so  crooked  that  linemen's 
spurs  were  useless  and  pole  climbing  as  an  art  reverted  to  old- 
fashioned  methods. 

In  this   connection  a   description  of  a  line  observed   by  the 


TELEGRAPH   AND   TELEPHONE  31 

authors  in  eastern  Nebraska  may  be  of  interest.  The  timber  used 
for  poles  was  osage  hedge  and  is  not  only  excessively  crooked  but 
also  very  hard.  At  the  top  of  each  pole  was  nailed  a  loop  of 
wire  which  served  in  lieu  of  an  insulator  and  the  line  wire  was 
strung  loosely  through  these  loops.  No  apparent  attempt  had 
been  made  to  avoid  trees  or  foliage,  which  grew  up  and  around 
the  line  wire  in  dense  profusion.  Whether  the  service  over  this 
line,  in  good  weather  and  bad,  was  of  satisfactory  character,  will 
be  left  to  the  reader's  imagination. 

Farmers  who  have  had  experience  in  the  ownership  of  these 
rural  lines  are  often  glad  to  turn  them  over  to  the  telephone 
company,  at  least  ultimately.  The  maintenance  of  poor  construc- 
tion at  a  standard  of  high  efficiency  is  an  expensive  matter  and 
the  telephone  company  which  succeeds  to  the  ownership  of  these 
lines  will  probably  replace  them  as  soon  as  feasible  by  standard 
construction.  A  company  making  this  change  will  naturally  use 
its  toll  routes  as  far  as  feasible,  at  least  where  toll  and  rural 
lines  were  once  parallel  on  the  same  right-of-way.  The  need  for 
entirely  new  pole  lines  may  be  confined  to  short  stretches,  if  the 
toll  route  is  followed  wherever  it  is  economical  to  make  use  of  it. 
Even  though  the  toll  line  does  not  follow  the  most  direct  route 
for  rural  distribution,  it  may  still  be  economical  to  use  it.  This 
method  of  reaching  rural  subscribers  is  resorted  to  quite  exten- 
sively. 

Current  Literature.     53:414-5.     October,  1912. 

The   First   Commercially   Feasible   Submarine   Telephone. 

The  first  practical  submarine  telephone  was  demonstrated  a 
few  months  ago  in  Seattle  by  the  inventor,  Alfred  Williams,  a 
young  English  engineer.  To  accomplish  his  design  Mr.  Williams 
had  to  overthrow  two  basic  laws  of  electricity  recognized  by 
every  authority  on  the  subject. 

In  the  presence  of  the  United  States  cableship  "Burnside"  and 
an  assembly  of  electrical  engineers  and  physicists,  Mr.  Williams 
gave  the  first  test  of  this  revolutionary  method  of  cabling  and 
telephoning  under  water.  The  commercial  value  of  his  invention 
may  be  gauged  from  the  fact  that  whereas  it  will  cost  the  United 
States  $400,000  to  lay  the  new  cable  to  Alaska  according  to 


32  GOVERNMENT   OWNERSHIP    OF 

established  methods,  Mr.'  Williams's  invention  would  enable  the 
Government  to  undertake  the  same  work  for  $20,000,  a  saving  of 
$380,000.  Again,  the  Williams  system  will  greatly  increase  the 
present  speed  of  cable  signals.  Above  all  other  things,  according 
to  the  prediction  of  the  writer  in  the  Technical  World  Magazine, 
it  will  make  possible  an  actual  conversation  between  continents. 

The  cable  employed  by  Mr.  Williams  in  his  demonstration  was 
a  bare  iron  wire  eleven  miles  long,  stretching  from  a  point  on  the 
mainland  to  the  north  end  of  Vashon  Island  and  lying  in  naked 
contact  with  the  salt  waters  of  the  Pacific.  Over  this  bare  wire 
was  sent  the  sound  of  the  human  voice  and  continuous  and  distinct 
conversation  was  kept  up  for  hours  with  the  mainland  at  Seattle. 
"I  looked  at  the  man  who  sat  next  to  me,"  Mr.  Donaldson  goes 
on  to  say,  "a  distinguished  professor  of  physics  from  a  noted 
university.  On  his  face  was  the  puzzled  expression  of  one  who 
had  just  stepped  from  a  well-known  land  into  a  world  of  unreality 
and  had  not  yet  adjusted  himself  to  the  new  conditions."  For  he 
saw  two  established  laws  of  physics  broken.  These  laws,  Mr. 
Donaldson  explains,  were :  (first)  the  water  was  a  conductor  of 
electricity — altho  a  poor  one — and  that  any  bare  wire  conductor 
in  contact  therewith  would  be  short-circuited  when  a  current  of 
electricity  passed  over  it;  and  (second)  the  law  that  it  was  not 
possible  to  have  an  electrical  charge  on  a  metallic  conductor  with- 
out that  conductor's  possessing  an  electrostatic  capacity.  But  the 
incontrovertible  fact  was  that  both  of  these  things  were  done 
under  exacting  conditions  and  in  the  presence  of  men  who  appre- 
ciated the  results  that  must  follow  the  establishment  of  these 
facts. 

If  experience  confirms  the  value  of  the  inexpensive  and  in- 
genious Williams  system,  cabling  and  long-distance  calls  across 
the  ocean  may  soon  become  part  of  the  ordinary  business  routine. 
We  shall  be  able  to  call  up  Peking  and  Paris  as  we  now  call  up 
Central. 

Contemporary  Review.     102:514-9.     October,  1912. 

The  Trading  Departments  of  the  State.     Godfrey  P.  Collins. 

It  is  an  axiom  amongst  business  men  that  no  business,  private, 
municipal,  or  State-owned,  should  be  carried  on  at  a  loss.  Some- 
one has  to  make  up  the  deficit;  the  creditors  of  the  private  trader, 


TELEGRAPH   AND   TELEPHONE  33 

the  ratepayers  of  the  Municipality,  the  taxpayers  of  the  State. 
The  inevitable  end  of  the  private  business  that  does  not  pay  its 
way  is  bankruptcy. 

The  managers  of  a  state-owned  or  municipal  business  are 
relieved  from  various  anxieties  that  beset  the  private  trader. 
They  have  not  to  meet  competition;  they  are  not  asked  to  show 
big  profits,  they  need  not  even  make  their  department  pay.  This 
assertion  can  be  verified  by  the  most  cursory  examination  of  the 
[British]  Telegraph  Department  Account.  State  ownership  of 
monopolies  is  so  rapidly  coming  to  the  front  in  the  political  world 
that  an  inquiry  into  the  result  of  the  present  trading  of  a  State 
Department  analysing  the  causes  of  success  or  failure,  and  point- 
ing out  the  dangers  to  be  avoided  in  the  future,  may  not  be  out 
of  place. 

Even  with  collective  ownership  of  monopolies  there  is  still 
room  for  individual  enterprise.  With  state  ownership  and  private 
ownership  running  side  by  side,  the  best  elements  in  both  act  and 
react  upon  each  other,  with  the  result  that  irregularities  in 
either  are  revealed  and  remedied.  State  management  in  carrying 
letters  has  been  an  undoubted  success,  but  the  same  cannot  be 
said  of  the  telegraph  or  telephone  business.  In  the  first  case, 
little  capital  has  been  required;  that  has  made  the  task  more 
simple,  but  in  the  telegraph  services  the  loss,  according  to  the 
Postmaster  General,  May  iSth,  1912,  involved  during  the  last  ten 
years  has  amounted  to  the  enormous  sum  of  at  least  ten  millions. 
It  is  only  fair  to  add  that  this  includes  the  sum  spent  on  capital, 
but  through  this  annual  loss  all  the  public  money  invested  in 
the  telegraph  service  since  1870  has  been  lost,  and  will  continue 
to  be  lost  unless  rates  are  so  adjusted  as  to  wipe  out  the  deficit. 
This  gigantic  figure  must  startle  any  ordinary  man,  and  force 
him  to  ask  how  a  business  run  on  such  abnormal  lines  can  be  kept 
going.  The  obvious  answer  is  that  the  unfortunate,  and,  gener- 
ally speaking,  unreflecting  taxpayer,  is  compelled  to  make  up  the 
deficiency,  oc,  in  other  words,  that  taxation  has  been  and  con- 
tinues to  be  imposed  for  the  sole  purpose  of  balancing  the  loss. 

In  the  Annual  Report  of  the  Postmaster  General  we  have  the 
frank  admission  that  "in  the  absence  of  a  capital  account,  a  com- 
plete statement  of  accounts  cannot  be  furnished,"  rather  a  striking 
admission  from  a  public  trading  department.  Is  it  possible  to 
conceive  the  chairman  of  a  company  calmly  making  a  similar 


34  GOVERNMENT   OWNERSHIP    OF 

remark  to  a  meeting  of  his  shareholders?  Assuredly  the  time 
has  arrived  when  a  full  and  accurate  financial  statement  should 
be  prepared,  so  that  the  taxpayers,  who  are  the  nation's  share- 
holders, may  judge  as  to  the  manner  in  which  their  money  has 
been  invested. 

Notwithstanding  that  a  complete  statement  of  accounts  cannot 
be  furnished,  sufficient  is  revealed  to  demonstrate  that  the  finances 
of  the  department  are  in  a  very  bad  way.  For  confirmation,  it  is 
sufficient  to  turn  to  An  Historical  Summary,  published  by  the 
Postmaster  General,  in  which  we  are  told  "At  no  time  has  the 
revenue  from  the  telegraph  services  been  sufficient  to  pay  interest 
on  the  capital,  and  for  the  last  twenty  years  the  service  has  been 
carried  on  at  a  considerable  loss,"  a  total  loss,  as  already  stated, 
of  ten  millions  during  the  last  ten  years.  When  Parliament 
passed  the  Telegraph  Act  in  1868,  difficulties  were  encountered 
with  two  powerful  bodies,  the  press  and  the  railway  companies,  as 
the  former  had  already  made  their  own  arrangements  with  the 
telegraph  companies  as  to  their  rates  for  telegrams.  In  the  Act 
clauses  were  inserted  providing  that  press  messages  amounting 
to  seventy-five  words  could  be  transmitted  between  the  hours  of 
9  a.  m.  and  6  p.  m.  for  one  shilling,  and  100  words  between  6  p.  m. 
and  9  a.  m.,  while  duplicate  copies  containing  the  same  informa- 
tion were  to  be  charged  only  2d.  That  this  arrangement  was 
unbusinesslike  and  decidedly  detrimental  to  the  best  interests  of 
the  public  is  clearly  proved  by  the  admission  of  the  Postmaster 
General,  who,  in  reply  to  a  question  in  the  House  of  Commons, 
stated  that  these  charges  entailed  a  loss  in  1910  of  £205,000  to 
the  taxpayer;  nor  is  there  any  reason  to  assume  that  the  result 
had  been  any  more  satisfactory  in  previous  years.  Certain  rail- 
way companies  have  the  right  to  send  telegrams  over  post  office 
wires  free  of  charge.  This  agreement  was  incorporated  in  the 
Telegraph  Act  of  1868,  when  the  telegraph  companies  sold  their 
way-leaves  and  telegraph  matters  to  the  State.  The  value  of  the 
free  telegrams  in  1910  amounted  to  about  £60,000.  The  yearly 
loss  on  press  messages  and  through  the  present  arrangement  with 
the  railway  companies  amounts  to  £265,000,  while  the  yearly  loss 
to  the  National  Exchequer  through  the  rates  charged  to  the  pub- 
lic amounts  to  £754,000  making  a  total  of  £1,019,000.  Various 
reasons  are  accountable  for  this  deficit. 

In  1883,  twelve  words  for  6d.  was  introduced,  the  Postmaster 


TELEGRAPH   AND   TELEPHONE  35 

General  anticipating  in  the  House  of  Commons  on  March  29th, 
1883,  that  this  rate  would  involve  a  loss  of  £177,000  per  year, 
which  he  then  anticipated  would  be  wiped  out  in  four  years,  an 
anticipation  which  experience  has  falsified.  In  1887,  Jubilee  year, 
further  concessions  were  made  involving  an  estimated  loss  to  the 
revenue  of  £57,000,  which  increased  by  50  per  cent  in  four  years 
to  £92,000. 

These  definite  statements  regarding  press  and  railway  tele- 
grams and  concessions  to  the  public  are  of  an  extremely  discon- 
certing character,  and  if  they  had  been  made  by  the  directors  of 
a  private  business  would  have  occasioned  anxious  questionings ; 
but  in  a  State  business  they  are  received  apparently  as  a  matter 
of  course,  and  without  comment. 

Undoubtedly,  political  pressure  was  the  cause  of  some  of  these 
rates  being  made,  and  it  is  admittedly  difficult  for  Governments 
to  resist  demands,  good  enough  in  themselves,  but  unsound  from 
a  financial  point  of  view.  But  surely  the  burden  of  particular 
concessions  should  not  be  placed  on  the  shoulders,  however  broad, 
of  the  general  taxpayer. 

The  spirit  which  animates  government  departments  is  con- 
ducive more  to  efficiency  than  economy.  Lack  of  efficiency  at 
once  leads  to  public  criticism.  At  the  Admiralty  and  War  Office, 
where  the  safety  of  the  nation  is  the  one  and  only  question, 
efficiency  must  be  purchased  at  all  costs;  but  in  a  public  trading- 
department,  where  only  the  convenience  of  the  public  has  to  be 
studied,  efficiency  should  be  combined  with  strict  economy  and 
sound  financial  principles.  It  has  been  argued,  quite  erroneously 
in  my  opinion,  that  because  the  Post  Office  as  a  whole  makes  a 
net  profit  on  its  transactions,  therefore  we  can  afford  to  conduct 
one  of  its  branches  at  a  loss.  In  other  words,  the  profit  earned 
by  carrying  letters  is  to  be  utilized  for  cancelling  the  loss  incurred 
by  sending  telegrams.  Is  it  conceivable  that  the  directors  of  any 
business  composed  of  three  departments  would  be  content,  year  in 
and  year  out,  to  contemplate  one  department  making  a  heavy  and 
growing  loss?  Would  they  not  take  steps  to  dismiss  the  manager 
if  he  could  not  show  a  profit,  and  instal  a  new  manager  in  his 
place?  These  difficulties  are  inevitably  heightened  and  multiplied 
in  a  State  Department,  but  it  is  radically  unjust  and  financially 
unsound  to  force  people  to  contribute  towards  the  upkeep  of  a 
non-paying  department  which  is  to  them  of  no  personal  benefit. 


36  GOVERNMENT   OWNERSHIP   OF 

No  one  will  contest  the  statement  that  the  telegraph  service  is 
used  mainly  by  the  people  who  pay  income  tax  either  as  private 
persons  or  in  their  business  capacity.  It  seems  to  have  escaped 
public  notice  that  the  extra  taxation  imposed  to  balance  the  ever- 
recurring  loss  lightens  the  pockets  of  the  poor  as  well  as  of  those 
who  reap  a  benefit  from  the  service. 

With  this  record  in  the  management  of  the  telegraph  service, 
it  would  be  the  height  of  folly  not  to  consider  seriously  the  finan- 
cial position  created  by  our  recent  solid  investments  in  the  tele- 
phone service.  Unless  we  profit  by  an  ample  recognition  of 
previous  mistakes,  we  shall  undoubtedly  repeat  them.  The  very 
persons  we  have  mulcted  by  the  mismanagement  of  the  one  de- 
partment will  be  called  upon  to  make  good  the  inevitable  losses 
sustained  by  the  other.  The  advantages  of  a  public  ownership 
of  telephones  are  apparent  and  in  accordance  with  modern  ideas. 
Grievances,  either  of  the  subscribers  or  of  the  staff,  can  be  readily 
ventilated  on  the  floor  of  the  House  of  Commons.  Ministers, 
jealous  for  the  good  reputation  of  their  department,  exercise 
every  possible  means  to  secure  the  efficiency  of  the  service  and 
to  meet  the  .demands  of  the  staff. 

Had  it  not  been  for  the  opposition  of  the  Treasury,  the  Post 
Office  would  have  embarked  in  the  telephone  business  in  a  "wide 
and  comprehensive  manner"  in  1880. 

In  1891  the  master  patents  owned  by  the  National  Telephone 
Company  lapsed,  and  the  Post  Office  then  decided  to  purchase  the 
trunk  lines,  leaving  the  local  areas  to  be  served  by  the  original 
companies.  The  State  took  over  the  whole  of  the  company's 
system  on  December  3ist,  1911.  Up  to  March  3ist,  1911, 
£11,130,327  of  public  money  had  been  invested,  and  at  the  time 
of  writing  the  National  Telephone  Company  claim  some 
£20,000,000  for  the  plant,  etc.,  handed  over  to  the  Government. 

When  the  State  took  over  the  telegraph  service  in  1868,  they 
little  thought  there  would  be  a  deficit  in  future  years  of  £1,000,- 
ooo  per  annum.  Unless  great  caution  is  exercised  in  the  fixing  of 
telephone  rates,  their  losses  may  be  largely  increased,  and  new 
taxation  will  be  required.  With  the  growing  demand  for  public 
ownership  and  public  control  of  monopolies,  new  methods  will 
need  to  be  adopted  in  the  House  of  Commons,  by  which  the 
grievances  of  the  staff  can  be  considered  and  the  interests  of  the 
taxpayer  may  be  safeguarded.  The  difficulty  of  raising  or  re- 


TELEGRAPH   AND   TELEPHONE  37 

adjusting  rates  is  a  real  one,  as  users  of  the  telephones  will  organ- 
ise and  make  their  influence  felt  in  a  stronger  degree  than  the 
general  public.  Any  politically  powerful  section  of  the  public  is 
a  very  real  danger  to  a  political  party — no  matter  what  its  com- 
plexion may  be.  If  it  were  not  so,  would  the  Post  Office,  under 
successive  Postmaster  Generals,  have  been  content  to  suffer  the 
large  and  growing  loss  on  the  telegraph  service?  It  must  be 
admitted  that  fear  of  public  unpopularity  has  prevented  these 
losses  being  wiped  out.  The  danger  which  I  foresee  in  govern- 
ment ownership  of  the  telephones  is  precisely  what  has  happened 
in  regard  to  the  telegraph,  that  pressure  will  be  exercised 
through  the  House  of  Commons  to  lower  rates  below  a  remuner- 
ative level. 

Literary  Digest.     44: 153-4.    January  27,  1912. 

Government  Telephone  in  England. 

The  London  Morning  Post  says : 

The  change  [January  i,  1912]  means  that  capital  amounting  to  over 
£16,000,000,  and  18,000  employees  are  transferred  to  the  state — that, 
in  short,  the  nationalization  of  the  telephone  service  is  an  accomplished 
fact.  Of  these  additional  civil  servants  at  least  12,000  will  have  the  right 
to  pensions  under  the  Post  Office.  The  staff  has  not  been  transferred  in 
its  entirety.  Certain  members,  such  as  the  solicitor,  the  secretary,  the 
general  superintendent,  the  chief  engineer,  the  assistant  engineer,  and  six 
provincial  superintendents,  will  not  come  under  the  Government.  The  highly 
paid  officials  will  receive  compensation  from  the  company's  fund  estab- 
lished for  that  purpose. 

An  idea  of  the  extent  of  the  service  taken  over  by  the  State  may  be 
gathered  from  the  following  statistics:  There  are  over  400,000  subscrib- 
ers, 1,571  exchanges,  500,000  exchange  stations,  and  36,000  private  sta- 
tions. Before  the  transfer  the  Post  Office  controlled  about  500,000  miles 
of  telephone  wire  with  120,000  subscribers.  By  the  change  it  will  control 
i>253>89o  miles.  The  additional  mileage  brings  the  capital  value  of  the 
system  owned  and  worked  by  the  State  up  to  £25,000,000.  The  change, 
so  smoothly  accomplished,  is  the  result  .  of  a  decision  in  Parliament  in 
1905.  The  old  company  worked  under  a  license  from  the  Government 
granted  over  thirty  years  ago.  It  was  resolved  that  the  license  should  not 
be  renewed,  and  that  on  its  expiration  the  telephone  service  should  be 
conducted  by  the  State. 


38  GOVERNMENT   OWNERSHIP    OF 

Public  Ownership  of  Telephones  on  the  Continent  of  Europe. 
PP.  396-7. 

Arthur  Norman  Holcombe. 

One  of  the  first  considerations  in  regard  to  a  telephone  system 
from  the  point  of  view  of  the  subscriber  is  the  price  of  service. 
Hence,  after  reviewing  the  development  of  the  leading  telephone 
systems  on  the  continent  of  Europe,  the  temptation  is  strong  to 
compare  the  rates  which  are  actually  in  effect  in  the  various 
countries  with  a  view  to  ascertaining  which  enjoys  the  cheapest 
service.  The  undertaking  presents  many  difficulties. 

In  local  exchange  service,  the  annual  subscription  paid  by  the 
subscriber  does  not  necessarily  indicate  the  actual  expenses  which 
he  is  called  upon  to  bear.  It  is  necessary  to  know  not  only  what 
additional  payments  he  is  required  to  make,  such  as  contribution 
towards  the  cost  of  construction,  or  charges  on  account  of  main- 
tenance of  his  line  and  the  installation  of  his  telephone  instru- 
ment, but  also  what  services  he  is  entitled  to  receive  in  return. 
Finally,  it  is  necessary  to  know  what  standard  of  service  is  main- 
tained. A  bad  service  is  dear  at  any  price.  But  a  high  price  does 
not  always  denote  a  good  service.  Under  similar  conditions,  if 
rates  are  reasonable,  a  low  rate  denotes  a  low  standard  of  service 
and  a  high  rate  a  high  standard  of  service.  But  the  expense  of 
maintaining  a  given  standard  of  service  varies  from  country  to 
country  on  account  of  differences  in  the  cost  of  materials  and 
especially  in  the  cost  of  labor.  Furthermore,  the  powers  of 
telephone  managements  with  regard  to  the  use  of  rights  of  way 
over  private  and  public  property  vary  greatly  from  country  to 
country.  In  some,  rights  of  way  are  free,  in  others  they  are 
costly.  Hence,  a  comparison  of  the  prices  even  for  precisely 
identical  services,  affords  no  certain  indication  of  their  relative 
reasonablenesss. 

Moreover,  even  if  the  conditions  and  standards  of  service  were 
directly  comparable,  and  the  expenses  of  construction  and  main- 
tenance identical  in  two  different  countries,  it  would  not  follow 
that  any  difference  in  the  rates  that  might  exist  for  an  equivalent 
service  would  measure  the  extent  to  which  the  higher  rate  was 
unreasonable.  For  both  rates  might  be  unreasonable,  one  un- 
reasonably high  and  the  other  unreasonably  low,  or  even  both 
might  be  unreasonably  high  or  low.  .  .  .  Governmental  tele- 


TELEGRAPH   AND   TELEPHONE  39 

phones  are  unreasonably  low  which  enables  telephone  users  to 
shift  a  portion  of  the  cost  of  service  to  the  shoulders  of  the 
general  tax  payers. 

These  difficulties  make  it  practically  impossible  so  to  compare 
telephone  exchange  rates  in  different  countries  directly  with  one 
another  as  to  reach  any  valuable  conclusions  concerning  their 
reasonableness  or  unreasonableness.  The  preliminary  allowances 
which  must  be  made  are  too  subtle,  and  the  evidence  on  the  basis 
of  which  such  allowances  must  be  calculated  is  not  available  in 
sufficiently  accurate  form. 

Social  Welfare  in  New  Zealand,    p.  210. 

Hugh  H.  Lusk. 

The  establishment  of  public  telephone  service  is,  of  course, 
more  recent  than  that  of  the  telegraph  in  New  Zealand,  as  else- 
where, but  even  in  the  comparatively  few  years  of  its  existence 
it  has  made  progress  to  an  extent  not  exceeded  by  any  other 
community  in  proportion  to  its  population,  while  it  is  far  in 
advance  of  most.  In  the  year  1910  there  were  thirty-three  tele- 
phone centres  in  the  country,  and  a  hundred  and  twenty-five  sub- 
exchanges,  while  the  number  of  private  connections  in  the  country 
in  that  year  considerably  exceeded  thirty  thousand,  and  were 
apparently  increasing  at  the  rate  of  fully  three  thousand  in  each 
year.  The  expense  of  these  private  telephone  connections  is  a 
little  less  than  $15  per  annum.  At  this  rate  the  service  is  fully 
self  supporting,  the  revenue  derived  from  it  last  year  being  fully 
$700,000 — (about  a  hundred  and  forty  six  thousand  pounds) — 
and  leaving  a  margin,  after  providing  all  expenses  of  operation, 
up-keep,  and  interest  on  the  capital  invested. 


AFFIRMATIVE  DISCUSSION 

Congressional  Record.  December  22,  1913    [current  file]. 

Government  Ownership  of  the  Telegraph  and  Telephone. 

David  John  Lewis. 

What  is  the  relation  of  the  public  and  the  Post  Office  to  the 
telegraph  and  the  telephone,  those  great  agencies  of  communi- 
cation between  the  people,  which  now  equal,  if  they  do  not 
eclipse,  the  postal  system  in  the  taxes  levied  upon  national  com- 
munication ? 

Do  they  differ  from  the  Post  Office  in  the  function  they  per- 
form; and  if  not,  how  do  they  differ  from  industrial  activities 
consigned  by  general  consent  to  private  control?  Is  there  some- 
thing in  their  nature  which  distinguishes  them  from  the  farm 
and  the  retail  store,  some  difference  which  reaches  the  dignity 
of  a  principle  of  classification,  assigning  one  to  the  domain  of 
postal  action,  while  leaving  farm  and  store  to  the  field  of  com- 
petitive control? 

Society  has  never  governed  itself  well  by  utilizing  merely  a 
single  truth  or  principle,  whether  it  be  laissez  faire,  unqualified 
individualism,  socialism,  or  communism;  it  possesses  aspirations 
and  appropriate  organic  attributes  and  powers  which  it  is  its 
duty  to  utilize  to  promote  its  welfare.  Now,  what  does  it  say 
on  the  subject  before  us,  first  as  to  the  natural  division  defining 
those  activities  which  should,  and  those  which  should  not,  on 
economic  and  social  grounds,  be  assigned  to  the  control  of  the 
individual?  I  quote  from  the  work  of  Prof.  Adams,  "The  State 
and  its  Relation  to  Industrial  Action":* 

Classes    of    Industry 

All  industries  fall  into  three  classes,  according  to  the  relation  that 
exists  between  the  increment  of  product  which  results  from  a  given 
increment  of  capital  or  labor.  These  may  be  termed  industries  of  constant 
returns,  industries  of  diminishing  returns,  and  industries  of  increasing 
returns.  The  first  two  classes  of  industries  are  adequately  controlled  by 
competitive  action;  the  third  class,  on  the  other  hand,  requires  the  superior 
control  of  State  power. 

*  Adams,  H.  C.  Relation  of  the  State  to  Industrial  Action.  [Out  of 
print.] 


42  GOVERNMENT   OWNERSHIP    OF 

Third    Class — Increasing   Returns 

The  important  thought  in  this  connection  is  that  where  the  law  of 
increasing  returns  works  with  any  degree  of  intensity  the  principle  of  free 
competition  is  powerless  to  exercise  a  healthy  regulating  influence.  This 
is  true,  because  it  is  easier  for  an  established  business  to  extend  its  facilities 
for  satisfactorily  meeting  a  new  demand  than  for  a  new  industry  to  spring 
into  competitive  existence.  If  this  analysis  of  industries  be  accepted  as 
correct,  there  can  be  no  question  as  to  the  line  which  marks  the  duties  of 
the  State.  The  control  of  the  State  over  industries  should  be  coextensive 
with  the  application  of  the  law  of  increasing  returns  in  industries. 

There  are  many  other  lines  of  business  which  conform  to  the  principle 
of  increasing,  returns,  and  for  that  reason  come  under  the  rule  of  central- 
ized control.  Such  businesses  are  by  nature  monopolies.  We  certainly 
deceive  ourselves  in  believing  that  competition  can  secure  for  the  public 
fair  treatment  in  such  cases  or  that  laws  compelling  competition  can  ever 
be  enforced.  If  it  is  for  the  interest  of  men  to  combine,  no  law  can  make 
them  compete.  For  all  industries,  therefore,  which  conform  to  the  principle 
of  increasing  returns,  the  only  question  at  issue  is  whether  society  shall 
support  an  irresponsible  extra-legal  monopoly  or  a  monopoly  established  by 
law  and  managed  in  the  interest  of  the  public.  In  this  latter  way  may 
the  benefits  of  organization  in  the  form  of  monopoly  be  secured  to  the 
people,  and  in  no  other. 

Thus  where  we  have  the  law  of  increasing  returns  as  a  cause 
we  have  monopoly  as  a  result.  How  shall  that  monopoly  be 
rendered  of  the  greatest  service  to  society?  Well,  that,  it  is  said, 
is  a  question  of  motive  in  financiering: 

Private  financiering:  The  relations  here  set  forth  will  present  them- 
selves more  clearly  to  our  minds  if  we  throw  into  comparison  the  rule  of 
public  and  the  rule  of  private  financiering.  A  private  business  is  managed 
to  secure  a  profit,  and,  other  things  being  equal,  the  higher  the  price 
secured  for  any  service  rendered,  the  higher  will  be  the  profit. 

Public  financiering:  The  rule  of  public  financiering,  on  the  other 
hand,  conforms  to  an  altogether  different  principle.  It  is  the  purpose  of 
government  to  render  services  at  the  lowest  price  consistent  with  efficient 
service.  Price  equals  cost.  This  is  true,  because  the  State,  being  the 
manager  of  the  business,  has  no  motive  in  acquiring  riches. 

The  public-service  motive :  In  institutions,  as  with  individuals, 
motive  is  everything.  The  motive  to  serve  one's  self  .is  the  com- 
mon motive,  and  to  impose  sufficient  restraint  upon  its  opera- 
tion, when  unsocial,  is,  stated  in  a  broad  way,  the  principal 
object  of  government. 

Where  public  needs  and  social  considerations  become  the 
principal  and  dominating  purpose,  where  imperative  public  ser- 
vice is  the  object,  the  world  naturally  has  not  yet  found  the 
restricted  private  motive  adequate  to  the  work. 


TELEGRAPH   AND   TELEPHONE  43 

But  what  is  an  industrial  monopoly?  The  answer  of  the  econ- 
omist is :  "An  industrial  monopoly  may  be  defined  as  a  business 
superior  to  the  regulating  control  of  competition." 

The  policy  of  restricting  public  powers  within  the  narrowest  possible 
limits  tends  to  render  government  weak  and  inefficient,  and  a  weak  govern- 
ment placed  in  the  midst  of  a  society  controlled  by  the  commercial  spirit 
will  quickly  become  a  corrupt  government;  this  in  its  turn  reacts  upon 
commercial  society  by  encouraging  private  corporations  to  adopt  bold  meas- 
ures for  gaining  control  of  government  machinery.  Thus  the  doctrine  of 
laissez  faire  overreaches  itself;  for  the  application  of  the  rule  which  it  lays 
down — 

Major  premise:     All  human  interests  are  the  same. 

Minor  premise:  Each  man  knows  his  own  interest,  and  if  left  to  him- 
self, will  follow  it. 

Conclusion:  The  best  possible  form  of  social  relations  will  emerge 
from  the  unrestricted  play  of  industrial  freedom — 

.     will  absolutely  destroy  that  harmony  between  public  and  private 
duties  essential  to  the  best  results  in  either  domain  of  action. 

Every  important  country  of  the  world — England  wholly,  as 
to  the  telephone  only  but  recently — has  long  adopted  these  views. 
I  insert  later  a  list  of  them  which  finds  the  United  States  looking 
very  solitary,  with  only  Spain  for  respectable  company. 

THE    TELEGRAPH 

In  New  Zealand  the  telegraph  system  is  under  the  principle 
of  public  financiering  and  conducted  by  the  Post  Office.  Since 
price  levels  there  generally,  as  well  as  social  and  educational 
conditions,  resemble  those  of  the  United  States,  it  will  be  per- 
missible to  compare  the  service  there  with  our  own.  As  against 
the  minimum  rate  under  private  financiering  of  25  cents  in  the 
United  States,  the  New  Zealand  minimum  rate  is  12  cents.  This 
illustrates  the  normal  functioning  of  the  telegraph  monopoly  as 
publicly  and  privately  financiered,  for  both  rates  are  equally  nor- 
mal in  relation  to  their  facts  of  ownership.  By  which  it  is 
meant  to  say  that  if  the  private  financier  should  discover  that 
only  the  lowest  rates  would  produce  the  maximum  of  profit,  and 
the  public  financier  that  only  the  highest  rates  would  insure  the 
most  extensive  public  service,  we  should  immediately  have  the 
New  Zealand  rate  in  the  United  States  and  the  American  rate  in 
New  Zealand.  [See  Table  I.] 


44  GOVERNMENT   OWNERSHIP    OF 

TABLE  1 

Number  messages 
Country.  Rate.  for  100  population. 

New  Zealand  $0.12  809 

United  States  $0.25  to  $1.00  110 

Thus,  under  what  appears  to  be  similar  price  and  wage  levels 
and  social  and  industrial  conditions,  we  have  a  telegraph  institu- 
tion under  the  rule  of  public  financiering  yielding  about  eight 
times  the  social  service  attained  by  private  financiering. 

[Table  2.  gives  the  number  of  telegrams  per  capita,  all  countries, 
of  letters  per  capita,  and  the  minimum  rates  per  telegram.] 

It  appears  that  we  rank  second  in  postal  rates  and  first  in 
utilization,  while  we  rank  seventeenth  in  the  telegraph  rate 
charged  and  ninth  in  resulting  social  service. 

Adequacy  of  Organisation 

I  present  now  the  elements  or  factors  laid  down  by  the  po- 
litical economists  as  necessary  in  the  working  organization  of 
a  monopoly  in  order  that  its  service  be  rendered  at  the  lowest 
cost,  and  that  society  should  realize  the  benefits  of  a  monopoly 
in  the  class  of  enterprises  for  which  that  form  of  capital  and 
labor  is  economically  and  socially  adapted.  The  elements  are 
stated  to  be: 

(a)  Unity  and  exclusiveness   of  organization. 

(b)  Details  of  management  well  worked  out. 

(c)  Facility   for   extension  by  mere  duplication   of   existing 
structure. 

(d)  A  social  demand  for  the  service  which  is  widespread  and 
constant. 

(e)  Adequate  ability  in  authority. 
Results : 

(f)  Service  at  less  cost  than  if  broken  into  groups,  because 

(g)  Assured  demands  for  service  admits  of  closest  calcula- 
tions. 

(h)  Extent  of  demand  admits  of  most  minute  division  of 
labor. 

(i)  Absence  of  rivalry  reduces  to  a  minimum  the  amount  of 
capital  and  other  expenditures  necessary  for  the  performance 
of  the  service. 

(j)  Speculative  management   is   eliminated; 


TELEGRAPH   AND   TELEPHONE  45 

(k)  And  thus,   with   public  financiering   motives, 

(1)  The  maximum  of  cheapness  and  efficiency  is  rendered 
possible. 

It  is,  of  course,  not  a  matter  of  criticism  that  the  telegraph 
monopoly  is  lacking  in  a  main  essential — the  public-service  mo- 
tive. As  a  privately  financiered  organization,  such  a  motive  is 
against  nature  and  should  not  be  asked. 

It  is  only  by  the  employment  of  these  factors  that  the  highest 
utilization  of  the  monopolistic  institution  can  be  attained. 

(a)  Unity  and  exclusiveness  of  organization :  That  this  is  a 
primary  essential  is  almost  a  truism,  admitted  on  all  sides.  The 
Bell  Co.  frankly  justifies  its  war  of  capture  or  destruction  of 
its  rivals  on  this  ground,  declaring  recently : 

We  believe  that  the  highest  commercial  value — 
In  which  they  mean  to  include  the  element  of  public  service — 

can  only  be  attained  by  one  system  under  one  common  control,  and  that  it 
can  not  be  given  by  independent  systems  unless  they  are  controlled  by 
agreements  in  effect  making  them  a  single  system — and  that  is  what  the 
Bell  system  is. 

We  believe  that  the  public  would  in  this  way  get  all  the  advantages 
and  avoid  all  the  manifest  disadvantages  of  public  ownership. 

In  treating  this  challenge  "public  ownership"  shall  be  taken 
as  equivalent  to  postal  control  and  administration  of  tele- 
phone and  telegraph  communication ;  and,  not  to  be  unfair,  the 
principle  of  private  financiering  shall  be  treated  as  equivalent 
to  the  Bell  Co.'s  own  administration  of  its  telegraph  and  tele- 
phone properties. 

The  postal  system  gives  nondiscriminating  service  rates  as 
low  as  any  in  the  world : 

(a)  The  I  and  2  cent  letter  rates,  good  to  all  our  possessions, 
to   Canada,   Great   Britain,   and  Germany,   and  to  the  farms   of 
the  country. 

(b)  The  cent  a  pound,  or  2   (2.38)  mills  per  mail  piece,  for 
educational  publications  consisting  of  the  magazine,  the  period- 
ical, and  newspaper  of  the  country. 

(c)  The  parcel  post,  extending  to  the  farm  with  rates  as  low 
as  5  cents,  against  the  25  cents  hitherto  charged  by  the  privately 
financiered   express   service. 

Besides  these,  it  dispatches  money  and  pays  interest  on  de- 


46  GOVERNMENT   OWNERSHIP    OF 

posits,  insured  by  the  indubitable  security  of  the  Nation,  and 
performs  other  services.  All  these  services  it  renders  as  cheaply 
as  any  other  postal  system,  stated  in  terms  of  money  (except 
Japan),  and  in  terms  of  price  levels  performs  them,  along  with 
Canada,  for  the  lowest  payments  in  the  world.  These  are  some 
of  the  advantages  of  public  or  postal  financiering.  And  we  ask 
no  consideration  in  this  comparison  for  the  higher  wages  of 
the  postal  employee  of  the  United  States  or  of  the  higher  price 
levels  here,  nor  for  the  fact  that  railway  mail  transportation 
is  paid  for  here,  which  is  commonly  not  the  case  elsewhere. 
The  disadvantages  would  probably  be  alleged  as : 

(a)  Postal  deficits  of  the  past. 

(b)  Alleged    unsatisfactory    political    phases    in    relation    to 
postal  personnel. 

With  regard  to  the  postal  deficits,  they  assuredly  represent 
only  a  small  part  of  the  amount  of  social  service  rendered  under 
statutory  public  policies  for  which  the  public  is  not  directly 
called  upon  to  pay.  The  franking  privilege  (1.85  per  cent  of 
the  total  postal  service),  the  carriage  and  handling  of  second- 
class  matter  for  educational  purposes  constitutes  29.24  per  cent, 
carried  at  about  one-seventh  its  proportional  cost;  these  are 
the  items  which  take  the  form  of  a  "deficit,"  only  because  the 
department  has  no  "public-service"  statement  showing  the 
amount  and  value  of  service  rendered,  like  a  railway  does.  If 
such  a  table  were  presented  there  would  be  no  deficit,  but  a 
surplus  of  very  many  millions,  quite  as  many  millions  as  the 
telegraphs  and  telephones  show  as  the  profits  of  their  private 
financiering.  This  very  clearly  appears  when  we  charge  to  the 
franked  matter  and  the  second-class  educational  mail  pieces 
the  rates  charged  on  other  postal  matter.  Thus  only  5.19  per 
cent  of  postal  revenues  are  derived  from  the  29.24  per  cent  of 
the  total  postal  services  devoted  to  such  second-class  matter, 
and  no  revenues  from  the  1.85  per  cent  of  such  service  given  to 
franked  and  penalty  matter. 

It  can  be  readily  seen,  therefore,  that  25.90  per  cent  of  the 
postal  service  goes  unaudited,  and  that  a  correct  statement  of 
its  services  would  credit  its  receipts  with  that  additional  amount. 
In  that  event  the  department  would  have  shown  a  surplus  at  all 
times  since  the  war,  and  in  1912  a  surplus  of  more  than 
$60,000,000. 


TELEGRAPH   AND   TELEPHONE  47 

The  classification  of  the  postal  deficit  as  a  "disadvantage" 
fails,  moreover,  to  comprehend  the  distinction  between  private 
and  public  financiering.  The  test  of  success  in  the  former  is 
the  degree  of  profit  it  brings  the  private  investor;  in  the  latter 
the  test  is  the  degree  of  social  service  rendered.  Had  the  parcels 
post  business  been  in  its  hands  the  department  would  have  shown 
no  deficit,  but  surpluses  in  much  the  greater  number  of  years.  The 
initiatory  experience  of  the  very  limited  service  we  now  enjoy 
shows  that  even  with  the  most  substantial  reductions  in  the  rates 
the  service  is  highly  profitable  to  the  department. 

The  postal  personnel:  Is  the  postal  employee  inefficient?  Let 
us  see  what  it  is  he  does.  Obviously,  in  the  main,  it  is  to  handle 
the  mail  piece.  How  well  does  he  perform  this  work?  Here 
is  the  record  for  27  years. 

[Table  3  gives,  1886  to  1912,  the  number  of  postal  employees, 
the  yearly  number  of  pieces  of  mail  handled,  and  the  average 
number  per  employee.] 

During  the  years  of  that  record  city  and  rural  delivery  have 
been  added,  virtually  doubling  the  quality  of  the  service.  And 
not  only  has  the  quality  nearly  doubled,  the  cost  of  service, 
as  we  see,  has  been  reduced  for  each  piece.  Can  any  telegraph 
or  telephone  company — yes,  can  any  public-service  corporation 
enter  the  lists  on  this  showing  of  advancing  efficiency  and 
progress? 

At  this  point  it  may  be  interesting  to  compare  our  postal  ac- 
complishment with  that  of  other  nations.  At  the  same  time 
tables  showing  our  telegraphic-service  performances  are  intro- 
duced for  comparison  with  accomplishments  in  these  services  by 
the  postal  systems  of  other  countries. 

[Table  4  compares  the  relative  number  of  pieces  of  mail 
handled  by  postal  employees  in  the  United  States  as  against  those 
of  other  countries.] 

From  Table  4  it  appears  that  Belgium  is  first  and  the  United 
States  second  in  postal  efficiency  among  all  the  nations  of  the 
world.  And  if  Belgium  were  not  composed  virtually  of  one 
large  city  with  suburban  surroundings  I  think  we  should  really 
rank  first. 

[Table  5  compares  the  number  of  telegrams  per  employee  and 
per  office  for  the  United  States  and  other  countries.] 

With  three  times  the  traffic  density  per  office  the  telegraph 


48  GOVERNMENT   OWNERSHIP   OF 

companies  of  the  United  States  still  do  not  take  first  place  in 
product  per  employee.  The  reason  for  this  will  appear  a  little 
later.  Here  attention  is  called  to  the  gross  amount  of  idle  plant 
implied  in  the  small  number  of  telegrams  per  average  day — not 
more  than  10  messages  per  day.  This  compares  with  193,  the 
average  mail  pieces  per  day  for  the  average  postal  employee, 
with  its  collection,  620  miles  of  railway  transportation,  distribu- 
tions, and  deliveries  over  the  city  and  rural  routes. 

If  the  inefficiency  of  our  telegraph  networks,  as  conducted 
in  the  United  States,  is  plain,  while  our  postal  agency  and 
competitive  industries  show,  at  least,  more  than  the  average  effi- 
ciency, it  may  be  that  the  particular  causes  of  such  inefficiency 
can  be  identified  and  brought  to  light. 

Recurring  now  to  the  elements  of  organization  essential  to  the 
highest  utilization  of  a  monopoly  for  social  purposes  we  can 
dispose  of  the  first,  "unity  and  exclusiveness,"  by  the  mere 
statement  that  there  are  some  25  telegraph  companies  doing 
commercial  business,  and  that  two  of  them  duplicate  their 
agencies  in  more  than  half  of  the  country.  The  next  element, 
"efficiency  in  details  of  management,"  will  require  more  elab- 
orate discussion. 

The  public  is  familiar  with  the  high  state  of  simplicity  at- 
tained in  postal  administration,  especially  in  dealing  with  the 
mail  piece  and  safeguarding  the  revenues.  I  have  had  experienced 
telegraphers  outline  the  processes  and  acts  of  attention  devoted 
to  the  telegram  under  private  administration  of  these  agencies. 
[Enumerates  mechanical  details.] 

Here,  then,  are  27  acts  or  processes,  for  16  of  which  an 
argument  of  elimination  might  well  be  made  with  the  introduc- 
tion of  the  stamp  and  other  simplified  postal  methods. 

But  whatever  may  be  thought  of  the  susceptibility  to  elimina- 
tion of  half  of  the  above  items,  it  is  believed  that  the  following, 
some  52  in  number,  all  accounting  processes,  would  give  way 
under  public  management  to  the  prepaid  or  postage-due  stamp. 
We  find  it  safe  to  intrust  nearly  three  hundred  millions  of  postal 
revenue  to  such  stamps  now.  [Enumerates  mechanical  details.] 

It  is  exactly  accurate  to  say  that  merely  affixing  the  stamp 
to  the  letter  replaces  these  47  accounting  processes  with  the 
individual  telegram  under  postal  practice.  That  is,  the  postal 
system  realizes  the  first  great  canon  of  a  publicly  financiered 


TELEGRAPH   AND   TELEPHONE  49 

monopoly.  Its  "details  of  management  have  been  well  worked 
out." 

We  shall  see  later  that  the  cost  per  message  should  decrease 
with  the  increase  of  the  traffic,  as  shown  with  the  mail  piece, 
and  another  element  of  economy  thus  be  added. 

To  the  foregoing  wastes  should  be  added  nearly  the  entire  ex- 
penditure of  the  rival  company  where  its  lines  and  offices  dupli- 
cate another  like  service.  To  speak  to  the  very  point  itself, 
the  expenditures  and  capital  costs  of  either  the  Bell  or  the 
Mackay  telegraph  companies,  where  their  lines  serve  the  same 
territory,  could  be  almost  wholly  eliminated,  since  either  system 
is  probably  adequate  to  handle  all  the  traffic  at  the  duplicated 
points. 

Inadequacy  of  Extension 

It  has  been  suggested  that  substantially  the  entire  capital  and 
current  expenditures  of  the  rival  telegraph  company  is  wasted 
with  reference  to  competitive  territory.  The  antonym  of  this 
condition  is  the  absence  of  any  telegraphic  service  at  points 
which  are  unattractive  to  private  finance.  There  are  64,022 
post  offices  and  branches  in  the  United  States  and  but  6,828 
(1907)  offices  maintained  by  the  telegraph  companies  themselves, 
although  they  treat  some  22,282  railway-signal  stations  as  tele- 
graph offices.  Converting  the  railway  telegraph  into  phone 
signalling  is  reducing  this  rather  doubtful  claim  for  proper  geo- 
graphical distribution  of  the  telegraph  service,  where,  with  the 
railway  business  having  necessary  precedence  and  amounting 
to  double  that  of  the  commercial  companies,  the  citizen's  mes- 
sage, even  where  service  was  given,  came  as  a  third  and  last 
attention.  These  telegraph  offices  are  maintained  by  the  railways 
at  their  own  expense  and  for  their  own  purposes,  and  would  be 
quite  as  available  for  the  postal  administration  as  they  are  now 
to  the  telegraph  companies.  They  can  hardly  be  claimed  as 
belonging  to  the  service  rendered  by  the  telegraph  companies 
proper.  And  while  we  are  on  the  subject  of  giving  the  public 
the  "advantages  of  public  ownership,  without  the  manifest  dis- 
advantages," a  comparison  of  the  service  rendered  under  postal 
administration  elsewhere  and  private  financiering  here  may  be 
of  interest. 


50  GOVERNMENT   OWNERSHIP    OF 

[Table  6  gives  the  relative  proportion  of  telegraph  offices  to 
post  offices.] 

Two  telegraph  offices  to  three  post  offices,  at  least,  elsewhere, 
but  one  to  over  seven  here. 

Stated  in  another  way,  the  commercial  telegraph  companies 
maintain  less  than  one  (0.8)  office  for  10,000  of  population  in 
the  United  States,  while  their  rate  averages  36  cents  per  mes- 
sage as  against  16  cents  in  New  Zealand,  which  maintains  over 
18  (18.51)  telegraph  offices  to  each  10,000  of  its  population. 
Why,  sir,  the  nearest  county  seat  to  this  Capital,  with  1,500 
population,  is  without  a  telegraph  office.  Such  a  statement  can 
not  be  made  of  the  postal  system.  When  this  is  considered  in 
connection  with  the  fact  that  New  Zealand  gets  a  working 
efficiency  of  3,713  telegrams  per  employee  per  annum  out  of 
its  personnel — telegraph — and  the  American  companies  but  3,487, 
it  is  not  difficult  to  see  how  far  the  private  financier  falls  short 
of  realizing  that  higher  efficiency  which  economists  declare 
feasible  in  properly  financiered  monopolies. 

The  most  serious  exaggeration  of  the  high  cost  of  service 
per  message  in  Western  Union  finance  remains  to  be  stated.  It 
is  the  factor  inseparable  from  the  financiering  of  a  private  price- 
making  monopoly.  I  refer  to  the  necessarily  low  or  inferior 
plant  utilization  practicable,  when  measured  in  terms  of  units  of 
service  attained,  where  the  rates  are  made  with  a  view  solely 
to  the  object  of  maximum  profit.  That  they  are  so  made  by  our 
telegraph  systems  we  have  already  seen.  Now,  the  effect  of  rais- 
ing the  price'  of  any  commodity  or  service  is  to  correspondingly 
diminish  the  effective  demand  for  it,  and  this  principle  is  well 
exemplified  for  the  telegraph  service  in  an  experience  which  I 
shall  take  the  time  to  relate.  The  following  statement  is  taken 
from  page  26  of  "Investigation  of  Western  Union  and  Postal- 
Telegraph  Cable  Cos."  by  the  Bureau  of  Labor: 

In  this  connection  it  is  interesting  to  cite  the  case  of  the  Chicago  & 
Milwaukee  Telegraph  Co.,  which  was  organized  in  1878.  It  began  by 
charging  a  lo-cent  rate  for  10  words  and  i  cent  for  each  additional  word 
between  Chicago  and  Milwaukee.  It  does  principally  a  board  of  trade 
business,  having  its  office  in  the  board  of  trade  building  in  Chicago.  In 
1878  the  Western  Union  cut  the  rate  to  5  cents  for  10  words,  or  one-half 
cent  a  word  for  all  words  between  these  points.  The  Chicago  &  Milwaukee 
Co.  met  the  cut  so  far  as  quotations  were  concerned,  but  kept  up  its  lo-cent 
rate  on  orders,  and  this  rate  continued  for  several  years  to  board  of  trade 


TELEGRAPH   AND   TELEPHONE  51 

members.  Finally,  in  1904,  the  Western  Union  raised  the  rate  to  25  cents 
for  all  except  members  of  the  board  of  trade,  to  whom  a  is-cent  rate  still 
obtains,  and  the  smaller  company  raised  its  rate  to  15  cents  for  10  words 
and  i  cent  for  each  additional  word  to  all  except  board  of  trade  members, 
to  whom  it  gave  a  lo-cent  rate.  Later  it  made  a  is-cent  rate  to  all.  It 
does  not  deliver  messages  except  by  telephone,  and  will  not  accept  a  mes- 
sage for  delivery  to  other  than  board  of  trade  members,  unless  the  delivery 
can  be  made  by  telephone. 

The  company  reports  handling  an  average  of  354  messages  a  day,  at 
an  average  charge  of  17^/2  cents  per  message,  on  a  rate  of  15  cents  for  10 
words  and  i  cent  for  each  additional  word.  This  Chicago  and  Milwaukee 
rate  is  perhaps  the  only  survival  of  the  low  rates  which  were  wiped  out 
by  the  understanding  between  the  Western  Union  and  the  Postal  Telegraph 
Companies. 

The  sequel  of  this  episode  is  that  the  Bell  system  at  length 
secured  control  of  the  Chicago  &  Milwaukee  Telegraph  Co.  and 
substituted  the  well-known  Western  Union  rate.  I  have  a  state- 
ment of  the  business  done  under  the  i5-cent  rate  and  under  the 
25-cent  rate: 

1909.    Messages  at  15-cent  rate 103,248 

1912.  Messages  at  25-cent  rate 57,689 

1913.  Messages    at    25-cent    rate,    six    months,    January    to 

June  30 22,018 

That  is,  a  two-thirds  increase  in  the  rate  has  resulted  in  a 
reduction  of  the  traffic  of  about  one-half,  and  this  is,  of  course, 
according  to  the  principles  laid  down.  The  motive  of  the  increase 
in  the  rate  for  those  making  it  was,  however,  that  they  secured 
about  as  much  revenue  for  half  the  messages  as  they  did  for  the 
normal  number  of  messages. 

Finally  we  have  the  competition  of  the  Bell  telegraph  and 
the  Mackay  or  Postal  Co.  The  former  has  220,938  miles  of  pole 
line  and  the  latter  66,154  miles.  The  Postal  Telegraph  Co.  has 
its  complementary  offices  maintained  by  itself  or  numerous  con- 
stituent  companies.  Nearly  all  of  these  are  stationed  at  points 
where  the  Western  Union  maintains  like  offices.  There  is  a 
profit  for  both  companies,  although  at  50,000  points  where  they 
have  no  offices,  but  which  their  wires  mostly  pass,  the  Postal 
Department  maintains  its  offices  without  profit.  Here  is  a  funda- 
mental defect  which  private  financiering  can  not  overcome. 

Need  it  be  suggested  that. the  Postal  Department  at  all  these 
50,000  points  has  its  agencies  established  and  that  where  the 
wires  are  in  the  neighborhood  to  be  connected  with  its  existing 


52  GOVERNMENT   OWNERSHIP    OF 

offices  no  additional  expense  would  be  incurred  to  furnish  these 
services  to  that  large  portion  of  the  public  now  denied  them? 
But  I  need  not  detail  the  complete  adaptability  of  the  postal 
system  to  readily  absorb  this  secondary  form  of  communication, 
in  nearly  all  instances,  without  any  of  the  costs  which  now  at- 
tend telegraphy  except  for  maintenance  and  the  wages  of  its 
operators,  linemen,  messengers,  and  necessary  technical  engineers. 
It  is  evident  that  our  private  exploitation  of  the  telegraph 
agencies  of  communication  fails  to  gratify  the  laws  of  either  ad- 
ministrative or  social  efficiency.  Their  rates  are  the  highest, 
their  services  the  lowest,  and  their  product  per  unit  of  economic 
energy  employed  among  the  lowest  in  the  world.  And  all  these 
failures  are  according  to  the  laws  laid  down  by  the  political 
economists  of  our  time. 

THE  TELEPHONE 

So  far  I  have  placed  under  survey  the  telegraph  agencies 
in  relation  to  the  postal  systems  of  the  principal  countries  of  the 
world.  My  next  duty  is  to  apply  the  same  standards  of  economic 
science  to  the  telephone. 

Efficiency  of  Telephone  Monopoly 

The  canons  of  efficiency  are  the  same  for  the  telephone  and 
telegraph : 

(a)  The  social  test:  What  is  the  degree  of  service  rendered 
to  the  public? 

(b)  The  economic:  What  does  it  cost  the  public? 

(c)  The  publicist:  What  are  the  social  influences? 

How  do  these  compare  under  private  and  postal  financiering? 

The  telephone  service  subdivides  itself  into,  first,  the  local 
and,  second,  the  toll  and  long  distance,  and  the  statistics  for  each 
of  these  is  twofold  in  character;  that  is  to  say,  there  are  the 
varying  rates  fixed  in  the  contracts  corresponding,  differing  in 
the  different  cities  and  towns  of  the  country,  by  which  the  pa- 
tron secures  a  limited  or  an  unlimited  local  service,  or  a  meas- 
ured, or  a  one  or  more  party  line  service,  or  by  which  for  toll  or 
long-distance  conversations  the  rate  is  graduated  into  day  and 
night  distinctions. 

[Table  7  compares  letter  and  local  telephone  rates  in  the 
United  States  and  other  countries.] 


TELEGRAPH   AND   TELEPHONE  53 

Thus  we  rank  but  fourteenth  on  the  phone  charge  and  are 
i  of  3  out  of  16  countries  in  which  the  local  rate  exceeds  the 
letter  rate.  It  will  not  do  to  say  that  our  letter  rate  is  too  low 
or  does  not  pay.  It  yields,  in  fact,  a  profit  of  just  one-third. 
The  local  and  other  telephone  rates  given  for  the  United  States 
are  those  of  the  Bell  system  for  1912,  embracing  about  two-thirds 
of  the  entire  traffic.  Our  mutuals  and  the  independents  give  a 
much  lower  rate,  according  to  the  statistics  of  1907,  which  em- 
brace all  companies.  The  Bell  system  in  that  year  secured  about 
twice  the  rate  for  its  service  which  was  collected  by  the  inde- 
pendents, presumably  a  local  service  as  good  as  the  Bell's. 

Let  us  review  this  1907  American  experience : 

TABLE   8 
AVERAGE  RATE  AND  OPERATING  EXPENSE  PER  MESSAGE 

Equals  rate  Operating 

Rate.       per  year.  expense. 

Mutuals $0.0047            $  5.35  $0.0039 

Independents 6114              18.50  .0062 

Bell  system 02ir             42.35.  .0148 

The  above  table  includes  local,  toll,  and  long  distance  for  the 
independents  and  the  Bell,  whose  statistics,  taken  from  the  census 
and  the  Bell  report  for  1907,  were  as  follows : 

TABLE    9  Number  of 

Receipts.  Expenses.  messages. 

Bell $128,556,506  $87,908,000  5,977,000,000 

Independents 55,227,531  29.J82.964  4,829,547,057 

The  Bell  data  are  taken  from  its  own  report,  while  the  inde- 
pendents are  taken  from  the  census  by  deducting  the  Bell  figures. 
The  item  of  Bell  receipts  represents  an  estimate  of  $7,803,306 
for  its  long-distance  receipts,  being  double  the  amount  of  the 
item  "Net  $3,901,653  from  telephone  traffic."  The  item  for 
maintenance  and  depreciation,  $34,665,700,  in  the  Bell  account 
largely  represents  an  element  of  undistributed  profits  which  have 
been  turned  into  new  construction  or  purchase  of  other  com- 
panies, the  whole  of  this  element  for  a  series  of  years  repre- 
senting, according  to  the  report  of  1912,  the  sum  of  $165,000,000. 
This  item  probably  largely  accounts  for  the  alleged  much  higher 
operating  expense  per  phone  of  the  Bell  system. 

I  have  now  to  present,  comparatively,  the  toll  rate  as  statisti- 
cally ascertained  for  the  different  countries.  Except  in  the 

7. 


54  GOVERNMENT   OWNERSHIP    OF 

United  States  and  where  otherwise  stated,  the  service  is  postally 
conducted. 

TABLE   10 

AVERAGE  CHARGE,  INTERURBAN    (TOLL)   AND  LONG-DISTANCE 

Country.  Rate. 

Luxemburg $0.030 

Germany .036 

Switzerland .074 

Sweden .079 

France .090 

Japan .100 

Norway .100 

Great  Britain .120 

Netherlands .130 

Italy '. .190 

United  States  (Bell  Co.) .190 

Denmark .230 

Belgium .230 

Hungary .260 

Austria .2«0 

It  will  be  observed  that  under  the  Bell  system  the  United 
States,  among  15  countries,  takes  the  eleventh  place.  But  this 
table  may  be  unjust  to  the  other  countries,  and  especially  to 
Denmark,  Belgium,  Hungary,  and  Austria.  Their  interurban 
statistical  '  rate  includes  the  receipts  from  their  whole  long- 
distance service,  while  it  can  not  be  certainly  determined  whether 
the  interurban  for  the  Bell  includes  their  "long-distance"  receipts, 
properly  speaking.  To  make  the  comparison  certain,  in  this 
respect,  it  will  be  necessary  to  compare  the  tariffs  of  the  different 
countries  for  their  long-distance  service. 

TABLE   1 1 

LONG-DlSTANCE    TARIFFS 

Country.                              100  miles.  300  miles.  500  miles.  700  miles. 

(a)  Sweden $0.08  (a)  $0.13    (a)  $0.20    (a)   $0r34 

(b)  Norway .09  (fc)  .24    (fc)       .36  (m)       .38 

(c)  France .10  (6)  .34  (m)       .38    (fc)       .48 

(d)  Italy .19  (c)  .35    (n)       .38    (c)       .58 

(e)  Belgium .19  (m)  .38    (c)       .53    (fir)     1.25 

(f)  Denmark .20  (n)  .38    (ft)       .60     (I)     1.26 

(fir)  Japan .20  (d)       .38    (g)       .82 

(ft)  New  Zealand .24  (f)       .40    (o)     1.50 

(i)    Great  Britain .24  (g)       .50 

(fc)  Germany .24  (o)       .62 

(1)   Australia .32  (ft)       .72 

(m)  Austria.. .38  (?)       .80 

(n)  Hungary .38  (i)       .84 

(p)  UnHed '  States'  '(.Beti  Co  j'  '.60 '  (p)' '  '1.80 '  (p)' '  3*  66 '  (P)' '  V.20 

NOTE. The   letters   preceding   the   name   of    each   country   are  used   to 

identify  the  countries  to  which  the  rates  given  for  300,  500  and  700  miles 
belong. 


TELEGRAPH   AND   TELEPHONE  55 

Thus  the  Bell,  system  gives  the  United  States  the  fifteenth  and 
last  place  in  the  scale  of  efficiency  with  respect  to  long-distance 
charges.  This  is  a  most  serious  circumstance  for  us  economi- 
cally and  socially,  in  view  of  the  American  scale  of  distances, 
as  may  be  seen  in  our  average  freight  haul,  which  is  ten  times 
that  of  Great  Britain,  and  from  four  to  five  times  as  long  as  in 
the  other  countries.  The  Bell  Telephone  has  an  even  rate  of  6 
mills  a  mile  for  a  three-minute  conversation ;  and  a  thousand 
miles  therefore  commands  a  Bell  charge  of  $6  per  talk.  This 
happens  to  be  about  the  same  rate  (7.53  mills)  the  railways  se- 
cure for  hauling  a  ton  of  freight  a  mile.  But  the  railways  do  not 
make  their  charge  arithmetically  progressive.  If  they  were  to  do 
so  their  rate  on  the  longer  distances  would  be  so  high  as  to  sweep 
such  traffic  from  the  rails.  What  they  do  in  fact,  although  not 
in  theory,  is  to  double  the  charge  as  the  distance  quadruples, 
thus  the  charge  for  25  miles  might  be  10  cents  per  100  pounds, 
first  class;  the  rate  for  100  miles  would  be  20  cents;  for  400 
miles,  40  cents ;  for  900  miles,  60  cents ;  the  rate  increasing  not 
arithmetically  but  according  to  the  square  root  of  the  number 
of  miles.  Thus  if  the  charge  for  a  phone  call  were  placed  at 
10  cents  for  25  miles,  on  the  square-root  formula  it  would  in- 
crease to  20  cents  for  100  miles,  40  cents  for  400  miles,  50  cents 
for  625  miles.  In  fact,  such  a  rate  would  slightly  exceed  the 
long-distance  rates  on  the  continent. 

[Table  12  gives  continental  rates  for  long  distance,  compared 
with  square-root  formula.] 

It  will  be  urged,  of  course,  that  prices  are  higher  here ;  but 
they  are  not  higher  here,  they  are  higher  in  Europe  on  the 
copper  and  poles,  which  mainly  enter  into  the  capital  cost  of  a 
long-distance  line;  higher  by  the  price  of  the  transportation  of 
such  material  from  this  country  to  the  Continent.  It  may  cost 
more  to  conduct  such  a  line  here  in  the  expense  of  personnel, 
but  the  difference  could  hardly  be  more  than  10  per  cent  of  the 
continental  rate.  It  is  true,  however,  that  a  special  charge  is 
made  abroad  for  an  urgency,  or  preferential,  use  of  the  line, 
but  its  payment  secures  one  the  preference,  while  with  the 
Bell  system  the  day  charge  is  all  the  same  and  one  has  to  wait 
his  turn  despite  the  rate.  The  truth  is  that  no  attempt  is  made 
to  justify  the  Bell  rates  on .  the  ground  of  social  efficiency. 
This  is  frankly  declared  by  the  present  managers  of  the  Western 


56  GOVERNMENT   OWNERSHIP    OF 

Union  and  Bell  telephone  system.     I  quote  from  the  report  of  the 
Bell  system  for  1911 : 

Instantaneous  and  immediate  transmission  of  communications  is  as 
yet  a  convenience  or  luxury,  although  under  modern  methods  of  business 
and  commerce  it  is  an  economical  alternative  to  the  cheaper  mail  service 
in  business  operations.  The  use  of  the  telegraph  may  be  a  popular  con- 
venience, but  it  is  not  a  necessity  and  is  still  confined  to  the  comparatively 
few,  and  for  that  reason  should  be  at  the  cost  of  the  few  that  find  benefit 
and  profit  in  that  use. 

This  is  bold  language.  We  are  virtually  told  that  of  the  three 
great  agencies  of  communication  only  one,  the  letter  post,  may 
be  used  by  the  people,  and  that  the  other  two,  the  phone  and 
the  telegraph,  are  conveniences  or  luxuries,  not  popular  neces- 
sities, and  for  that  reason  should  be  at  the  cost  of  the  few,  i.  e., 
of  the  rich,  to  which  class  largely  the  present  rates  confine  the 
service.  But  this  is  not  a  justification.  It  is  a  confession. 
These  tariffs  are  the  scandal  of  public-service  rates  the  world 
over  and  are  endured  because  the  service  is  known  only  to 
those  in  easy  circumstances,  who  overlook  the  rates  in  the 
glamour  of  the  marvelous  character  of  the  process  of  communi- 
cation. 

The  Tariffs 

The  statistical  charges  give  but  a  very  deficient  conception  of 
the  situation  as  to  actual  telephone  tariffs.  While  there  are 
many  points  at  which  a  phone  may  be  rented  on  the  basis  of 
yearly  tariffs  of  $24  for  business  and  $18  for  residence  service, 
at  such  points  the  number  of  subscribers  is  relatively  low; 
and  as  a  matter  of  fact,  with  the  Bell  system  at  least,  the  rule 
of  5  cents  a  call  comes  more  nearly  expressing  the  rate  available 
to  the  public.  This  is  seen  in  the  following  examples  allocated 
according  to  the  density  of  the  different  centers  of  population. 
[See  Table  13,  page  57.] 

Comparisons  based  on  the  flat  or  unlimited  service  rate  do  not 
adequately  present  the  field  of  traffic.  While,  except  in  small 
towns  and  for  the  residence  service,  the  flat-rate  business  works 
out  the  lowest  average  charge  per  call,  it  does  not  reflect  the 
degree  to  which  a  popular  use  of  the  service  may  be  had.  To 
measure  these  possibilities  we  must  go  to  the  limited  or  measured 


TELEGRAPH   AND   TELEPHONE  57 

TABLE  13 

TABLE  GIVING  ANNUAL  TARIFFS,  FLAT-RATE  SERVICE,  FOR  LEADING 
CITIES  OF  DIFFERENT  COUNTRIES 

Christiania J $  21.44 

Stockholm . .  ! 24.44 

The  Hague ^./T 26.00 

Copenhagen 32.00 

Tokyo 34.00 

Auckland,  New  Zealand . ;  ^ 34.09 

New  Haven 84.00 

Cincinnati 100.00 

Oakland,  Cal > 84.00 

Philadelphia 1  90.00 

Chicago2 t i  84.00 

Denver 138.00 

Amsterdam 36.00 

Rotterdam 36.00 

Berlin 43.20 

Budapest 57.90 

Paris 77.20 

London 82.79 

Boston 125.00 

Seattle 90.00 

Washington 168.00 

Baltimore3 174.00 

San  Francisco 180.00 

New  York3 228.00 

American  average  exceeds  foreign  average  300  per  cent. 

1  Competition. 

2  Recently  this  rate  raised  to  $125;  competition  presumably  removed. 

3  Baltimore  and  New  York  limited  to  5,400  and  5,700  calls. 

service  rates,  under  which  the  user  is  asked  to  pay  in  accordance 
to  the  number  of  calls.  This  comparison  can  not  be  made  as 
simple  as  for  the  flat-rate  tariffs  without  circumscribing,  which 
I  shall  do  by  taking  selected  numbers  of  rates  as,  for  example, 
the  cost  per  call  of  the  first  2,000,  5,000,  and  10,000  calls  for  one- 
party  business  lines. 

[Table  14  gives  a  comparison  of  rates  per  call  for  measured 
service  in  principal  cities  of  the  world.] 

A  rival  of  the  Bell  system  gives  the  following  table  of  com- 
parative rates  before,  during  and  after  competition,  presumably 
flat  rates: 

[Table  15  compares  Bell  rates,  American  cities,  before,  dur- 
ing, and  after  competition,  presumably  flat  rates.] 

Postal  telephone  rates,  like  mail  rates,  are  uniform  for  similar 
services.  The  following  table  of  the  same  rival  gives  the  rates 
of  the  Bell  system  for  some  60  cities,  graded  from  the  highest 
to  the  lowest  populations. 


58  GOVERNMENT   OWNERSHIP    OF 

[Table  16  gives  the  rates  in  various  American  cities,  arranged 
in  order  of  population.] 

The  effect  of  these  abnormal  distance  rates  upon  the  utiliza- 
tion of  the  service  may  readily  be  seen.  The  number  of  inter- 
urban  conversations  per  phone  in  the  different  countries  is  as 
follows 

TABLE  17 
LONG-DISTANCE    CONVERSATIONS    PER    PHONE 


Number  of 

Country. 

conversations. 

Rank. 

Denmark  

761 

1 

Netherlands  

634 

2 

Denmark  (private)  

348 

3 

Germany  

301 

4 

Sweden  

150 

5 

Russia  

142 

6 

Norway  , 

135 

7 

Switzerland  

130 

8 

France  

125 

9 

Norway  (private)  

109 

10 

Italy  (private)  

73 

11 

Japan  

69 

12 

Italy  

62 

13 

United  States  (1912,  Bell)  

48 

14. 

Belgium  

44 

15 

Austria  

37 

16 

Hungary  

34 

17 

It  is  apparent,  of  course,  that  telephone  rates  fail  to  satisfy 
the  law  of  social  efficiency  and  the  pronouncement  just  quoted 
from  the  Bell  Co.  far  from  making  apology  disavows  any  con- 
cern or  obligation  in  that  respect. 

Administrative   Efficiency 

Let  us  look  now  into  the  question  of  the  operative  efficiency  of 
the  privately  financiered  telephone  as  compared  with  its  public 
and  postal  management  in  other  countries. 

[Table  18  gives  telephone  operative  efficiency,  United  States 
and  other  countries.] 

In  the  column  for  phone  efficiency  the  long-distance  or  inter- 
urban  call  is  included  and  rated  as  equal  to  four  local  calls  in 
its  demands  upon  the  personnel.  The  column  for  postal  efficiency 
is  inserted  to  show  the  performance  of  the  postal  personnel. 
For  this  purpose  the  postal-service  unit  is  treated  as  the  average 
mail  piece  and  the  telegram  as  equal  in  service  to  10  mail  pieces, 


TELEGRAPH   AND   TELEPHONE  59 

while  the  local  call  is  rated  as  equal  to  one-half  mail  piece, 
or  unit,  and  the  interurban  as  equal  to  two  mail  pieces.  All 
kinds  of  employees  of  the  telephone  and  post  are  included  in  the 
statement. 

Now,  what  is  the  cause  of  this  disparity?  My  explanation 
is  that  it  is  the  deterrent  influence  of  high  rates  on  the  amount 
of  the  traffic  and  consequent  plant  utilization.  Obviously  the 
amount  of  traffic  will  depend  on  the  rate.  If  it  should  cost  me 
but  a  cent  a  call,  I  will  use  the  phone  freely;  if  it  cost  me  a 
nickel,  I  should  probably  restrict  my  calls.  So,  too,  not  only  may 
the  message  rate  be  so  high  as  to  discourage  the  use  of  the  phone, 
but  the  rate  for  phone  subscription  may  do  so.  In  short,  to  a 
vast  majority  of  the  people  the  degree  of  utilization  depends  on 
the  cost. 

We  reach  the  same  conclusion  for  the  telephone  that  we  had 
reached  for  the  telegraph.  Private  financiering  fails  to  secure 
either  the  maximum  of  social  service  or  the  maximum  of  plant 
utilization. 

It  is,  of  course,  not  a  matter  of  criticism  that  the  telephone 
monopoly  is  lacking  in  a  main  essential — the  public-service  mo- 
tive. In  a  privately  financiered  organization  such  a  motive  is 
against  nature  and  should  not  be  asked. 

The  perfection  of  unity  and  of  exclusiveness — except  as  to 
the  express  service — is,  of  course,  found  in  the  postal  organiza- 
tion. 

General  Conclusions 

It  appears  that  despite  our  high  price  and  wage  levels  in  the 
United  States  we  take  first  place  as  to  postal  rates.  •'Among  16 
countries  we  take  but  fifteenth  place  as  to  telegraph  rates ;  among 
15  countries,  but  tenth  place  as  to  interurban  telephone  rates; 
among  12  countries,  only  the  eleventh  place  on  local  telephone 
charges ;  and  among  1 1  countries  jpe  take  the  eleventh,  or  last 
place  on  long-distance  telephone  charges. 

Our  postal  service,  publicly  financed,  in  spite  of  our  high  price 
levels,  is  giving  rates  the  lowest  prevalent  in  the  world,  and 
possesses  the  very  highest  working  efficiency;  while  the  tele- 
graph and  telephone  monopolies,  like  the  express  companies, 


60  GOVERNMENT   OWNERSHIP   OF 

subjected  unnaturally  to  the  rule  of  private  financiering — rank 
among  the  very  lowest  in  working  efficiency  and  among  the  high- 
est in  the  rates  exacted  from  the  public. 

.  I  think  it  apparent  that  the  doctrine  of  laissez-faire  is  clearly 
inapplicable  to  the  telegraph  and  the  telephone;  i.  e.,  that  these 
public  agencies  of  communication  do  not  belong  legitimately 
to  the  field  of  the  rule  of  private  financiering. 

We  have  violated  the  laws  of  economic  science  in  giving  to 
the  functionaries  of  private  finance  those  things  which  were  not 
theirs.  There  is  a  law  of  private  finance;  there  is  a  law  of 
public  finance.  Each  has  its  subjects  upon  which,  properly  con- 
fined, each  will  normally  operate  for  the  maximum  of  human 
service.  We  have  ignored,  or  rather  misapplied,  one  of  these 
laws  by  giving  over  to  the  private  financier  a  postal  duty. 

Competition 

Mr.  Speaker,  with  regard  to  this  method  as  a  corrective 
agency,  I  cannot  do  better  than  quote  from  the  work  of  Prof. 
Holcombe,  one  of  the  Harvard  Economic  Studies,  entitled  "Pub- 
lic Ownership  of  Telephones  on  the  Continent  of  Europe." 
After  stating  the  theory  of  competition  in  relation  to  prices 
generally,  he  speaks  of  the  telephone  service: 

Since  the  policy  of  free  competition  offers  no  adequate  assurance  of 
reasonable  rates  for  telephone  service,  the  question  at  once  arises,  How 
shall  they  be  determined?  The  only  alternative  to  competition  is  monopoly 
of  some  sort.  The  forces  of  demand  and  supply  will  operate  under  a  regime 
of  monopoly,  as  under  one  of  free  competition,  but  the  results  will  not  be 
the  same.  In  the  latter  case  the  interests  of  the  monopolist  will  ordinarily 
lead  him  to  fix  his  rates  at  a  level  which  is  intended  to  yield  him  the 
maximum  of  profit.  Having  adopted  a  tentative  schedule  of  rates,  he  care- 
fully observes  the  extent  of  the  demand  for  his  services  at  those  rates  and 
readjusts  them,  if  need  be,  until  the  actual  sale  of  his  services  verifies  his 
calculations.  His  purpose  always  is  to  make  as  large  as  possible  the  surplus 
that  remains  after  deducting  from  his  gross  receipts  all  the  expenses  of 
rendering  the  service.  Consequently,  under  a  regime  of  unregulated  private 
monopoly  rates  are  certain  to  be  exorbitant. 

In  the  telephone  business,  to  this  disadvantage,  from  the  viewpoint  of 
the  community  of  monopolies  in  general,  must  be  added  a  further  special 
disadvantage.  Not  only  is  there  no  protection  against  exorbitant  rates, 
but  also  there  is  no  security  that  the  distribution  of  the  total  charges 
between  the  different  classes  of  telephone  users  will  be  made  on  a  basis 
calculated  to  promote  the  widest  utility  of  the  service,  such  as  it  is. 


TELEGRAPH  AND   TELEPHONE  61 

Regulation 

There  are  many  things  to  be  predicated  of  regulation,  of 
course,  and  I  shall  make  no  attempt  to  cover  them  all.  Among 
them,  however,  are  some  effects  that  are  certain.  A  regime  of 
regulation  will — 

(a)  Eliminate  competition. 

(b)  Strongly  tend  to  crystallize  the   rates    and,   with  them, 
local    discriminations. 

(c)  Remove  personal  discriminations. 

(d)  Limit  extension  to  places  of  sufficiently  high  profit  to  at- 
tract private  finance. 

(e)  Thus  defeat  the  attainment  of  the  maximum  extension  of 
social  service. 

The  three  first  propositions  are  exemplified  in  our  railway 
history  of  the  last  10  years  and  in  that  of  England  for  20  years. 

Efficacy  has  never  been  claimed  for  regulation  as  a  method 
for  obtaining  the  maximum  social  service.  Take  the  case  of  the 
Bell  Co.  controlling  the  Chicago  &  Milwaukee  Telegraph  Co., 
which  raised  its  rates  per  telegram  from  15  to  25  cents,  abridging 
its  former  social  service  nearly  50  per  cent.  Contrast  this  with 
the  British  Post  Office  in  1885  reducing  its  rate  from  24  cents 
to  12  cents  and  increasing  the  number  of  messages  about  60 
per  cent.  In  the  former  case  there  was  an  increase,  perhaps 
a  justifiable  increase,  of  profits  to  the  private  owners;  in  the 
latter  there  was  a  slight  loss  in  the  revenues,  but  a  tremendous 
gain  in  public  service  rendered.  It  comes  back,  then,  to  the 
fundamental  principle  involved  in  the  rule  of  private  financiering. 
Regulation  is  helpless  to  invest  the  private  investor  with  a  pub- 
lic-service motive;  and  without  that  motive,  not  the  maximum 
social  service,  but  naturally  enough  for  the  investor,  the  maxi- 
mum return  on  his  investment,  is  the  rational  rule  of  conduct. 

Naturally  enough,  the  owners,  for  the  most  part,  when  con- 
fronted by  a  proposal  to  postalize,  object  and  point  to  the  alter- 
native of  regulation.  But  this  attitude  on  their  part,  it  is  not 
considered  unfair  to  suggest,  is  dictated  rather  by  private  than 
by  social  considerations.  Postalization  puts  an  end  to  their 
profits.  Regulation  may  or  may  not  curtail  them  in  a  degree, 
while  the  stability  of  their  monopoly  is  actually  augmented  by 
regulation,  bringing  with  it  an  increment  to  the  value  of  their 


62  GOVERNMENT   OWNERSHIP   OF 

securities.  In  this  connection  it  ought  to  be  remembered  that, 
whatever  our  hesitation  may  be  on  administrative  grounds  to 
applying  the  state  principle  to  all  forms  of  natural  monopoly  in 
obedience  to  the  principle  that  "private  monopolies  are  intoler- 
able," such  hesitation  need  not  be  felt  as  to  postal  subjects  given 
the  Postal  Department.  It  may  be  confidently  asserted  that  no 
bank  or  railroad  organization,  private  or  public,  has  better  as- 
surances of  administrative  efficiency  to  offer. 

Objects  of  Relief 

Having  completed  the  analyses  of  the  economics  and  the  traffic 
effects  of  our  systems  of  communication  by  wire,  let  us  put 
the  direct  question,  What,  if  any,  are  the  deficiencies  to  be  cor- 
rected? Answering  this  question  just  as  directly,  I  wish  to  say 
that,  while  our  postal  rates  are  as  low  as  those  of  other  countries, 
we  find  that  in  the  United  States — 

(a)  The  telegraph  charge  averages  more  than  double. 

(b)  The  local-call  phone  charge  about  double. 

(c)  The  toll  and  long-distance  telephone  charge  about  four 
times   the  rates  generally  prevailing  in  the  principal  countries  of 
the  world. 

Proceeding  on  the  assumption  that  our  postal  system  can  do 
as  well  for  the  wire  forms  of  communication  as  it  does  for  the 
letter — that  is,  can  handle  the  wire  messages  as  cheaply,  com- 
pared with  these  countries,  as  it  does  the  letter — it  is  suggested 
that  these  forms  of  communication  should  be  postalized;  that 
is,  the  postal  agency  should  be  permitted  to  conduct  these  com- 
munications in  order  to  normalize  the  rates  and  extend  the 
service  to  the  great  body  of  the  people. 

Proceeding,  again,  on  the  further  assumption  that  the  abnor- 
mal rates  operate  to  abridge  the  total  service  rendered  in  the 
same  percentage  that  the  rates  are  excessive — a  moderate  state- 
ment, I  think — then  the  Nation  has  short-work  claims  on  such 
services  as  follows : 

(a)  The  telegraph:   Number  of  messages,   175,000,000. 

(b)  Local  phone  service:  Number  of  .messages,  7,500,000,000. 

(c)  Toll  and  long  distance:  Number  of  messages,  300,000,000. 
But  the  use  of  the  telephone,  which  is  an  hourly  convenience 

if  not  a  necessity,  in  homes  that  can  afford  it,  is  at  present  con- 


TELEGRAPH   AND   TELEPHONE  63 

fined  to  a  small  percentage  of  the  homes  of  the  country.  The 
proportion  of  telephones  is  I  to  each  12  persons.  If  the  number 
of  office  or  business  phones  be  deducted  from  this  proportion, 
it  is  indeed  doubtful  whether  more  than  one  family  in  six  enjoy 
this  convenience. 

Now,  the  postal  object  is  not  merely  to  confer  equal  privi- 
leges in  form,  but  to  effectuate  equality  in  practice.  It,  there- 
fore, so  organizes  its  service  and  formulates  its  rates  as  to 
remove  any  economic  barriers  to  their  use.  The  poor  man, 
the  very  poor  man,  can  actually  utilize  any  form  of  the  postal 
service.  Its  rates  are  adapted  to  his  means.  Mr.  Vail,  president 
of  the  Western  Union  Telegraph  Co.,  declares: 

There  is  a  road  to  every  man's  door;  there  should  be  a  telephone  to 
every  man's  house. 

The  parallel  is  indisputable,  but  its  complementary  fact  should 
also  be  noted.  It  was  society,  and  not  any  privately  financed 
monopoly,  that  built  these  roads.  He  also  adds,  apologetically 
for  the  Bell,  that  the  system  must  be — 

Under  common  control  ...  it  must  be  sufficiently  strong  to  con- 
stitute practically  one  system,  intercommunicating,  interdependent,  uni- 
versal. 

Now,  is  this  possible  in  the  United  States?  I  feel  justified  in 
saying  that  it  is  possible  here,  if  nowhere  else ;  and  the  Swiss 
tariff  system,  I  submit,  affords  demonstration  of  this  statement. 
But  of  this  the  point  fundamental — indeed,  the  whole  objective 
of  the  discussion,  the  supportive  facts — must  be  developed  later. 

Method   of  Relief 
The  Telegraph  and  Telephone  Services  Interdependent 

These  two  methods  of  communication  are  so  interrelated  and 
interwoven  and  so  identical  in  characteristics  that  the  only  differ- 
ence which  now  suggests  itself  is  that  the  communication  in  one 
case  is  addressed  to  the  eye  and  in  the  other  to  the  ear.  The 
mechanism,  the  wire,  and  the  active  principle — electricity — are 
the  same  for  both ;  moreover,  it  is  a  fact  at  present  that  the  same 
telephone  wire  may  be  and  actually  is  simultaneously  engaged  in 
conveying  both  the  forms  of  communication,  especially  for 


64  GOVERNMENT   OWNERSHIP   OF 

longer  distances,  where  the  telegram  formerly  was  the  more 
efficacious.  Coupled  with  this  fact  that  every  telephone  wire  is 
in  fact  or  potentially  a  telegraph  wire  is  the  circumstance  of  con- 
clusive economic  importance.  Since  the  telephone  wires  permit 
the  discharge  of  the  double  function  without  interference  one 
with  the  other,  the  duplication  of  the  physical  agencies  will 
involve  a  doubling  of  the  expenses  of  each  service — except  for 
the  points  of  large  telegraphic  traffic,  where  the  skilled  teleg- 
rapher will  be  needed  as  a  supplement  to  the  exchange  personnel. 

I  think  it  sufficiently  obvious  that  the  telegraph  and  telephone 
are  not  two  services,  but  really  one  service ;  as,  indeed,  they  rep- 
resent besides  but  one  function,  the  function  of  intercommuni- 
cation. Accordingly,  it  may  be  that  they  will  require  the  appli- 
cation of  but  one  policy  and  method  of  treatment. 

We  have  seen  that  our  problem  is  threefold,  viz.,  the  exten- 
sion of  postal  relief  to  the  three  forms  of  electrical  communica- 
tion— the  local  call,  the  long-distance  conversation,  and  the  tele- 
gram— which  I  name  in  the  priority  of  their  importance.  It 
appears  that  the  postalization  of  but  one  agency,  the  telephonic 
network,  may  be  effective  for  all  these  forms  of  relief. 

Reconstruction 

Having  concluded  that  on  both  economic  and  social  grounds 
these  agencies  of  communication  require  public  or,  more  exactly 
speaking,  postal  financiering,  it  is  now  in  order  to  consider  the 
subject  in  its  constructive  aspects. 

The  postal  method:  The  examples  of  nearly  all  the  principal 
countries  point  in  but  one  direction  as  to  the  agency  which 
should  be  employed.  It  is  the  postal.  Its  truly  wonderful  genius 
for  doing  little  services  cheaply  and  well  is  now  winning  for 
it  the  express  function  in  the  United  States,  and  in  the  following 
countries  has  added  the  telephone  and  the  telegraph  to  the  mail 
piece : 

List  of  Countries  Owning  Both  Telegraph  and  Telephone 
Postal  Telegraph  and  Telephone  Countries 

Australia,  Austria,  Belgium,  Bosnia-Herzegovina,  Bulgaria, 
New  Caledonia,  Dahomey,  Denmark  (at  least  part — state,  private, 
and  municipal),  Egypt  (part),  Formosa,  France,  Tunis,  Ger- 


TELEGRAPH   AND   TELEPHONE  65 

many,  Switzerland,  Great  Britain,  Sweden  (greater  part),  Greece, 
South  Africa  (Union  of),  French  Guinea,  Servia,  Hungary, 
Roumania,  India  (British — state  and  private),  India  (Dutch — 
state  and  private),  French  Indo  China,  Panama  (government), 
Italy  (state  and  private),  Norway  (greater  part),  Japan  (in- 
cluding Korea),  New  Zealand,  Luxemburg,  the  Netherlands 
(state,  municipal,  and  private),  Russia  (state  and  private),  Siam 
(state  and  private). 

Countries  Owning  Telegraphs  Only 

Abyssinia  (Ethiopia),  Alaska,  Argentina,  Bolivia  (not  all), 
Brazil,  Chile  (nearly  all),  Colombia,  Costa  Rica,  Cuba,  Mexico, 
Montenegro,  Paraguay,  Persia,  Peru,  Portugal,  Spain,  Turkey, 
Uruguay. 

All  the  civilized,  yes,  almost  all  the  uncivilized  countries  have 
postalized  the  electrical  message,  and  it  will  be  observed  that 
Spain  and  Brazil  only  among  the  greater  countries  join  the 
United  States  in  licensing  out  the  telephone  agencies  of  com- 
munication to  private  parties.  England  naturally  has  been  the 
last  to  yield,  but  since  January  i,  1912,  even  she  has  assumed  the 
entire  postal  function  of  conveying  intelligence,  by  taking  over 
the  Bell  service.  Some  of  the  Provinces  in  Canada  took  the  step 
a  few  years  ago,  so  that  our  situation  is  now  so  exceptional 
as  to  be  actually  noteworthy. 

Construction  de  novo  of  the  wire  agencies,  as  a  program,  is 
denied  us,  of  course,  on  the  grounds  of  national  economy  as 
well  as  on  sound  political  consideration.  It  therefore  becomes 
necessary  to  compare  existing  structures  and  determine  their 
adaptability  for  economical  postal  management  and  the  purposes 
of  the  desired  relief. 

There  is  considerable  likeness  between  the  postal  and  wire 
mediums,  even  in  their  physical  methods.  Both  systems  are 
susceptible  of  classification  into  units  of :  (a)  Number  of  offices ; 
(b)  number  of  employees  engaged;  and  (c)  miles  of  routes  of 
communication.  Let  us  see  how  the  two  compare  in  these  re- 
spects ;  I  say  "the  two,"  for  they  are  not  three  in  number.  The 
telegraph  and  telephone  are  but  one  agency  since  the  same  wire 
— that  is,  the  telephone  wire — now  carries  the  written  and  the 
spoken  communication  at  the  same  time. 


66  GOVERNMENT   OWNERSHIP   OF 

[Table  19  gives  number  of  postal,  telegraph  and  telephone 
offices,  with  numbers  of  employees,  miles  of  wire,  etc.] 

Telegraphic   communications   are    feasible   over  three    routes : 

First.    The  Western  Union  pole  lines,  221,000  miles. 

Second.    The  Postal  Telegraph  Co.  pole  lines,  66,000  miles. 

Third.  The  Bell  and  independent  toll  and  long-distance  wires, 
221,000  miles. 

Considered  merely  from  the  standpoint  of  their  value  in  eco- 
nomic use  to  the  postal  system,  however,  the  Postal  or  Mackay 
telegraph  lines  would  have  to  be  rejected  because  of  their  in- 
sufficient extension.  The  Post  Office  would  have  to  more  than 
treble  the  Mackay  mileage  to  do  a  general  service.  The  West- 
ern Union  is  not  subject  to  the  same  objection;  it  has  the  ex- 
tension as  a  telegraph  agency  merely.  But  investigation  dis- 
closes that  only  two-fifths  of  its  wire — 600,000  miles — is  copper, 
so  that  three-fifths — 900,000  miles — of  its  system  would  not  be 
susceptible  of  satisfactory  telephonic  use.  The  third  system, 
the  Bell  and  independent  toll  or  long-distance  lines  in  combina- 
tion, suffices  in  extent  and  mechanical  construction  for  both  ob- 
jects, being  entirely  copper  and  having  the  requisite  range  and 
extent.  All  of  which  means  that  if  we  wished  to  give  relief 
merely  to  telegraph  users  we  might  do  so  by  the  use  of  the 
Western  Union.  If  we  wished  to  extend  relief  as  well  to  toll 
and  long-distance  users,  the  interurban  and  long-distance  phone 
system  would  alone  suffice.  But  if  in  harmony  with  other  coun- 
tries we  wished  to  extend  relief  to  users,  actual  and  potential, 
of  all  the  forms  of  communication  by  wire,  we  could  do  so 
completely  by  the  single  expedient  of  utilizing  the  Bell  and 
independent  telephone  systems,  since  the  telephonic  network  is 
potentially  a  telegraph  network  as  well. 

It  appears  that  the  toll  and  long-distance  telephone  lines 
aggregate  in  pole-line  distribution  about  220,000  miles  and  have 
a  wire  development  of  nearly  3,000,000  miles.  Besides  this  they 
articulate  with  over  17,000,000  miles  of  exchange  wires,  distrib- 
uting the  messages  into  the  homes  and  offices  of  the  country 
through  about  9,000,000  phones.  This  long-distance  net  work 
in  terms  of  distance  compares  with  the  telegraphic  network  as 
follows : 


TELEGRAPH   AND   TELEPHONE  67 

TABLE  20 
TELEPHONIC  TOLL  AND  TELEGRAPHIC  NETWORKS 

Miles. 

Telephonic,  pole  lines 221,161 

Telephonic   wire   distribution 2,789,163 

Telegraphic: 

Western  Union,  pole  line 220,928 

Postal,  pole  line 66,154 

Total..,  287,082 


Western  Union,  wire  distribution 1,517,317 

Postal,  wire  distribution 408,735 

Total 1,926,052 

The  above  commercial  telegraphic  network  in  1907  reached 
6,828  offices  and  the  railway  network  22,282.  Generally  speaking, 
it  is  only  at  the  former — the  commercial — that  messages  are 
promptly  delivered,  and  by  far  the  greater  number  of  railway 
offices  are  in  towers  and  otherwise  inaccessible,  not  to  say  so 
engrossed  with  the  prior  claims  of  railway  messages  that  the 
nonrailway  public  is  hardly  to  be  said  to  secure  a  real  tele- 
graphic service.  As  opposed  to  this,  the  telephone  network, 
through  the  Bell  alone,  reaches  70,000  places,  and  probably 
nearly  100,000  places  as  a  whole.  As  against  the  6,828  distribut- 
ing offices  of  the  telegraphic  network,  the  telephonic  network 
possessed  in  1907  some  43,819  public  and  private  exchanges — 
offices  from  which  to  dispatch  or  receive  the  telegram — and  now 
some  9,000,000  phones  through  which  instantaneous  and  eco- 
nomical collection  and  delivery  of  the  message  may  be  had. 
Another  feature  possessed  by  the  telephonic  network,  not 
possessed  entirely  by  the  telegraphic,  is  that  the  former  lines 
are  copper,  while  but  40  per  cent  of  the  Western  Union  and  an 
unknown  proportion  of  the  others  are  of  such  material.  In 
consequence  of  this  condition,  the  telegraph  lines  would  require 
almost  complete  reconstruction  in  order  to  be  susceptible  of  tele- 
phonic usage.  President  Vail,  of  the  Western  Union,  refers  to 
this  fact  in  his  report  for  1912.  He  says : 

No  telegraph  company  could  go  into  the  telephone  business  without 
substantially  reconstructing  its  telegraph  plant  to  adapt  it  for  toll  or 
long-distance  use,  and,  in  addition,  building  exchange  plants,  involving  an 
investment  many  times  that  of  its  telegraph  plant. 

The  two  wires  which  are  necessary  for  one  telephone  circuit  can  by 
multiplying  be  made  into  four,  six,  or  eight  telegraph  circuits  and  can  be 
used  for  both  telegraph  and  telephone  transmission  at  the  same  time. 


68  GOVERNMENT   OWNERSHIP   OF 

And,  again: 

A  single  telegraphic  circuit  or  wire  can  not  be  used  for  telephonic 
purposes. 

Another  circumstance  is  that  the  telephonic  lines  are  metallic 
circuits;  that  is,  have  the  return  wire  necessary  for  the  spoken 
message,  while  the  telegraph  lines  do  not,  but  rely  on  the 
"earth  return,"  which  is  adequate  for  the  telegram  but  unsuited 
for  speech,  except  in  uninhabited  districts  like  Alaska,  where 
the  interferences  of  adjacent  electrical  industries  are  absent. 

The  practical  effect  of  these  differences  is  that  the  telegraphic 
network  is  fitted  only  to  carry  the  telegram,  with  poorer  collec- 
tion and  delivery  facilities,  while  the  telephonic  network  .is 
adapted  to  carrying  the  telegram  and  also  the  conversation,  and 
has  the  best  collection  and  delivery  facilities. 

Stated  in  a  more  formal  manner : 

The  telegraphic  network  will — 

(a)  Dispatch  the  telegram  and 

(b)  Deliver  it  at,  say,  7,000  places. 
The  telephonic  network  will — 

(a)  Dispatch  the  telegram  and 

(b)  Deliver  it,  through  50,000  exchanges,  at  100,000  places. 

(c)  Provide  instantaneous  and  economical  delivery  through 
9,000,000  phones. 

(d)  Provide  toll  conversations. 

If,  in  connection  with  these  patent  advantages  of  the  tele- 
phonic network,  economy  in  operation  is  also  to  be  considered, 
it  ought  to  be  observed  that  in  maintaining  and  personneling 
the  telephonic  network  for  telephonic  uses  the  operating  and 
capital  expenses  will  have  been  met  and  discharged  for  the 
telegraphic  service  as  well.  Except  for  the  employment  of 
telegraph  operators  at  points  of  high  density,  and  the  tele- 
graphic instruments  necessary  in  the  telegraphic  traffic,  no  ad- 
ditional expense  would  be  incurred  for  the  telegraph  service. 
Indeed,  this  element  is  involved  in  a  triplicate  way  on  the  tele- 
graphic lines.  To  the  extent  that  the  Postal  Co.  duplicates  the 
lines  of  the  Western  Union  we  should  in  effect  be  paying  two 
bills  of  maintenance  expense;  first,  on  the  Western  Union,  dis- 
charging only  the  telegraphic  function,  and  then  again  on  the 
Postal,  a  mere  duplicate  of  the  former.  If  to  this  be  added 


TELEGRAPH   AND   TELEPHONE  69 

the  circumstance  that  the  toll  telephonic  network  left  in  private 
hands  could  give  a  telegraphic  service,  practically  without 
cost  to  itself,  which,  whatever  its  rates,  supplemented  by  its 
instantaneous  telephonic  delivery  and  collection,  would  take 
the  most  lucrative  business  from  the  Postal  Telegraph  agency, 
it  becomes  evident  that  the  proposition  to  acquire  the  telegraphic 
in  preference  to  the  telephonic  network  can  reflect  only  a 
superficial  view,  rational  30  years  ago,  but  wholly  untenable 
since  the  interurban  and  long-distance  telephone  wire  has  been 
developed.  To  take  over  the  telegraph  wires  at  this  time  would 
for  these  reasons  be  only  to  invite  unnecessary  failure  and,  per- 
haps, postal  bankruptcy. 

The  English  experience  appears  to  be  conclusive  upon  this 
point,  namely,  that  an  independent  telegraph  business,  because 
of  the  growing  inroads  of  the  telephone  traffic,  is,  for  the  future, 
of  doubtful  financial  feasibility.  Even  in  the  United  States 
there  are  three  long-distance  communications  by  phone  to  one 
by  telegraph,  while  in  Germany  the  ratio  is  five  to  one.  Pru- 
dence therefore  clearly  dictates  that  our  postal  system  should 
deliberately  avoid  the  telegraph  wires  and  select  instead  the 
telephone  lines.  Such  a  choice  would  enable  the  Postmaster 
General  to  render  both  services  at  minimum  rates,  since  he 
would  have  but  one  bill  of  expenditure  to  pay  for  their  joint 
operation. 

We  have  seen  that  the  total  capitalization  for  the  commercial 
companies  was  $773,268,344,  and  that  the  1912  capitalization  of 
the  Bell  was  $620,760,654,  which,  taken  at  the  proportion  of  its 
wire  mileage  for  1912,  would  give  a  present  capitalization  of 
$874,310,800  for  our  entire  telephonic  network.  While  this  con- 
clusion cannot  be  verified  in  the  absence  of  official  data  for  the 
independents,  it  is  believed  that  it  actually  overstates  the  pro- 
portionate capitalization  of  the  independents. 

The  average  rate  or  receipt  per  local  call  for  the  principal 
countries  of  the  world  is  shown  to  be  i.i  cents,  which  compares 
with  a  rate  exactly  the  same  for  the  independents  in  1907,  which 
includes  their  toll  messages,  and  with  2.1  cents  per  local  message, 
exclusively,  for  the  Bell  Co.  in  1912.  As  late  as  1900  the  Bell 
report  gives  the  cost  to  the  subscriber  as  varying  from  I  to  9 
cents  per  connection.  As  the  Bell  system  includes  from  three- 

8 


70  GOVERNMENT   OWNERSHIP    OF 

fourths  to  four-fifths  of  the  telephonic  institution,  it  is  appar- 
ent that  its  operations  present  conditions  which  are  national 
in  character.  This  deduction  will  graphically  appear  when  we 
compare  it  with  even  the  national  telephone  institutions  of 
the  greatest  countries,  which  it  overshadows  in  capital  invested 
as  well  as  in  wire  development  and  in  gross  expenditure  and 
income.  It  is  only  our  postal  system  which  exceeds  it  in  scope 
and  extent  or  the  other  characteristics  of  a  national  institution. 
It  would  seem  to  be  unnecessary  to  indicate  the  similarity  be- 
tween the  postal  function  of  communication  and  that  of  the 
wires,  while  attention  has  already  been  given  to  the  fact  that 
but  about  one  home  in  five  can  now  be  reached  by  the  electrical 
communication.  That  this  is  due  to  the  limitations  natural 
to  the  rule  of  private  financiering  may  be  shown  in  a  comparison 
of  the  universality  of  the  postal  agency  under  contemporaneous 
conditions.  It  is  certain  that  under  private  financiering  the 
wires  are  not  destined  to  follow  the  mail  carrier  into  the  ordi- 
nary home.  And  yet,  for  even  more  pressing  reasons  of  use 
and  necessity,  this  is  what  they  should  do.  It  is  as  much  the 
necessity  and  the  right  of  society  to  have  the  effective  means 
of  sending  its  communications  to  the  homes  of  the  masses  by 
wire  as  by  human  carriers,  not  to  speak  of  the  similar  necessity 
and  the  right  of  the  masses  to  enjoy  such  facilities  for  their 
own  uses.  Private  financiering  has  exhausted  its  right  to  a 
longer  lease  of  the  agency  to  realize  this  end,  even  if  it  were 
to  convince  us  of  the  sincerity  of  such  a  program. 

Local  rates :  It  would  be  highly  desirable,  if  financially  feas- 
ible, to  secure  for  the  phone  user  a  local  rate  of  a  cent  per  call, 
the  average  statistical  receipt  per  call  for  postal-telephone  coun- 
tries, and  approximately  the  average  receipt  with  the  indepen- 
dents. Such  a  rate  would,  if  uniformly  available,  place  the  phone 
service  within  the  reach  of  every  American  home.  No  one  should 
complain  of  such  a  rate,  as  with  our  wage  levels  the  I  cent  is 
an  actually  negligible  price. 

The  closest  tariff  approaches  to  the  cent-a-call  rate  are  th£ 
German  and  Swiss  tariffs  for  measured  service  with  a  cent-a- 
call  charge.  But  the  Germans  have  a  basal  fee  besides,  and  the 
Swiss  also  a  basal  arbitrary  charge  amounting,  after  the  second 
year,  to  $7.72  per  annum.  Serious  apprehension  of  inability 


TELEGRAPH   AND   TELEPHONE  71 

to  attain  the  cent  rate  as  an  average  statistical  result  need  not 
be  felt  in  view  of  the  experience  of  the  American  independents 
and  foreign  postal  systems.  But  grave  doubt  may  be  felt  as  to 
applying  such  a  rate  to  the  metropolitan  populations. 

The  Bell  reports  give  the  average  cost  per  subscriber  for  its 
entire  system,  excluding  the  cost  of  toll  lines,  as  $105  each. 
The  total  cost  of  construction  for  400,000  subscribers'  phones 
and  25,000  (?)  booths  of  the  New  York  Telephone  Co.  is  given  in 
the  report  of  the  Public  Utilities  Commission,  as  follows : 

Telephone    plant    $50,128,000 

Less  depreciation  reserve 5,123,786 


Total $45,004,214 

Thus  the  cost  per  phone  is  $106,  or  but  one  per  cent  greater 
than  the  average.  The  assumption  that  a  metropolitan  plant  ex- 
ceeds the  town  and  rural  so  greatly  in  cost  does  not  seem  to  be 
borne  out.  When  millions  of  miles  of  wire  can  be  massed  in  a 
single  conduit,  even  though  at  an  underground  expense,  the  cost 
per  mile  and  the  maintenance  service  are  greatly  reduced. 

But  no  discussion  of  local  rates  is  actually  valid  that  does 
not  explain  the  use  being  made  in  many  American  cities  and 
other  countries — Munich,  and  so  forth — of  the  automatic  system 
with  which  the  subscriber  quickly  and  simply  makes  his  own  con- 
nection, eliminating  the  exchange  operator,  and  by  switching  and 
trunking  devices  reducing  the  miles  of  manual  wire  per  phone 
(2.50)  in  the  most  substantial  way.  There  is  now  but  I  phone 
to  12  persons,  and  these  phones  are  in  the  stores  and  offices, 
probably  not  more  than  one  home  in  five  being  so  provided, 
especially  in  the  larger  cities.  Each  city  block  of  fifty  or  a 
hundred  homes  has  a  few  subscribers,  whose  lines,  in  connection 
with  the  automatic  system  and  its  switching  and  trunking  de- 
vices, could  be  used  as  trunks  to  the  central  for  the  multitude 
of  block-party  lines  that  would  follow  the  introduction  of  the 
postal  cent-a-call  rate.  The  total  investment  per  subscriber 
might  thus  be  brought  down  to  $70  or  lower,  while  the  expenses 
of  operation  in  the  cities  would  be  reduced  by  the  amount  of  the 
expense  of  exchange  operators.  One  should  feel  rather  hesitant 
to  make  the  above  statement  if  the  actual  facts  of  practice  and 
accomplishment  were  not  before  him.  In  the  case  of  these  local 
rates  so  various  and  incongruous  even  within  the  Bell  network, 


72  GOVERNMENT    OWNERSHIP    OF 

it  is  submitted  that  while  a  goal  should  obtain  toward  which  the 
Postal  Department  would  direct  its  aim,  yet  the  approaches  to 
an  ultimate  uniform  rate,  for  local  services  should  for  a  time  be 
experimental  and  only  tentative  in  spirit.  The  widest  latitude 
should  be  given  the  department  to  conduct  its  experimentation, 
and  specific  freedom  to  try  out  its  plans  in  selected  places. 

If  it  be  found  that  metropolitan  centers  represent  a  greater 
capital  cost  per  phone,  I  think  it  will  also  be  found  that  such 
phones  represent  an  even  greater  percentage  of  use  or  patronage. 
The  average  utilization  of  the  subscriber's  phone  is  said  to  be 
less  than  2  per  cent  of  its  time  capacity. 

For  all  practical  purposes  the  cost  of  conducting  the  agency 
will  be  nearly  the  same  whether  the  lines  be  used  at  their 
maximum  or  their  minimum  capacity.  The  problem  of  the  rate 
maker  is  therefore  twofold: 

(a)  The  body  of  rates  must  on  the  average  pay  the  total  cost 
of  service. 

(b)  The  particular   rate  or  adaptations  of  the  rate   should 
produce  the  maximum  utilization  of  the  agency  and  thus  the 
greatest  service  to  the  public. 

Therefore,  according  to  the  hypothesis,  if  the  gross  annual 
cost  of  operation  were  known  and  the  amount  of  traffic  which 
a  given  rate  graduation  would  result  in  might  be  predicated, 
it  would  be  feasible,  theoretically,  to  adjust  the  rates  to  gratify 
both  maxims.  So  much  for  the  theory,  which,  of  course,  is 
not  precisely  realizable,  although  the  universality  of  postal  opera- 
tions renders  theoretical  reasoning  highly  useful  and  almost 
accurate,  as  applied  to  average  periods.  What  in  practice  is 
feasible  is  a  system  of  approximations  as  to  cost  and  traffic; 
and  it  is  by  these  methods  that  private  financiers  pass  upon 
such  projects  in  the  establishment  of  public  utilities  of  the 
various  kinds.  Applying  this  method  to  our  subject,  let  us  ob- 
serve the  probabilities. 

Cost  of  Maintenance  and  Operation 

Interurban  Network 

The  operation  of  220,928  miles  of  pole  line  of  Western  Union 
in  1912  represented  expenditures  as  follows: 

Operating  expenses,  including  rent  of  leased  lines,  re- 
construction, repairs,  miscellaneous  interest,  etc $35,350,422 

Taxes 

Total..         $36,063,835 


TELEGRAPH   AND   TELEPHONE  73 

This  represents  the  operating  and  maintenance  expenses  of  a 
pole-line  network  identical  in  mileage  with  the  toll  and  long- 
distance network,  including  depreciation  on  1,500,000  miles  of 
wire,  as  against  about  3,000,000  miles  of  such  telephone  wire. 
It  also  represents  the  wastes  of  telegraphic  accounting  previ- 
ously set  forth,  as  well  as  other  elements  of  expense  indicated 
as  susceptible  of  elimination  under  postal  operation,  e.  g.,  office 
rents,  legal  expenses,  corporate  salaries,  and  so  forth.  If  we 
ignore  these  savings  and  add  to  the  total  sum  interest  at  the 
rate  of  3  per  cent  on  $200,000,000  of  Government  bonds  and  4  per 
cent  to  cover  the  depreciation  not  fully  included  in  the  expendi- 
tures statement  of  the  Western  Union,  and  also  add  5  cents  per 
telegram  and  2.^/2.  cents  per  call  for  the  extra  business  to  follow 
the  proposed  reduction  in  rates,  then  the  following  table  ap- 
proximately represents  an  annual  fiscal  statement  for  the 
telegraphic  and  long-distance  telephone  services  under  the  new 
system : 

Expense  of  operation  and  maintenance  of  221,000  miles 

of  pole  line  and  3,000,000  miles  of  interurban  network  $36,000,000 

Additional  for  depreciation,  4  per  cent 8,000,000 

Interest  on  bonds,  3  per  cent 6,000,000 

600,000,000  telephone  connections,   at  2%  cents  each 15,000,000 

300,000,000  extra  telegrams,  at  5  cents  each 15,000,000 


Total $80,000,000 

The  receipts  of  the  toll  and  long-distance  lines  are  now  be- 
tween sixty  and  seventy  millions.  The  application  of  continental 
rates  to  this  traffic  has  produced  a  result  of  over  five  long-dis- 
tance calls  per  capita  per  annum  in  Germany  as  against  about 
three  here,  although  our  phones  double  theirs  in  per  capita 
distribution.  With  reference  to  the  number  of  telegrams,  the 
New  Zealand  experience,  now  nine  per  capita,  is  presented. 
From  all  these  data  it  is  assumed  that  under  postal  rates  the 
long-distance  phone  traffic  would  equal  the  German  and  half 
equal,  at  least,  the  New  Zealand  development  for  the  telegram. 
Such  results  in  tabulated  form  would  be  as  follows : 

Average  receipt,  300,000,000  telegrams,  at  25  cents  each     $75,000,000 
Average   receipt,   600,000,000   conversations,    at   10    cents 

each ; 60,000,000 

Total $135,000,000 

Deduct  estimated  expenditures 80,000,000 


Profit $55,000,000 


74  GOVERNMENT   OWNERSHIP    OF 

Obviously  the  figures  as  to  the  prospective  traffic  can  only 
be  speculative ;  but  they  are  no  more  so  than  the  conditions 
and  computations  of  private  enterprises  in  the  same  field.  In 
their  support  it  may  be  said  that  the  gross  figure  of  $135,000,000 
approximately  represents  the  gross  receipts  now  derived  from 
the  toll  and  telegraph  business;  and  it  is  not  apparent  why  the 
postal  system  should  not  secure  an  equal  gross  revenue  with  the 
inducement  of  offering  double  and  treble  service.  That  the  sub- 
stitution of  low-service  rates  for  high  ones  will  find  a  comple- 
mentary potential  traffic  inhibited  by  the  higher  rates  has  been 
made  sufficiently  evident.  Yet  it  seems  justifiable  to  add  that  the 
experience  of  the  parcel  post  in  giving  mobility  to  an  immobile 
but  potential  express  traffic  sustains  the  thesis.  Probably  two 
hundred  million  shipments  will  be  moved  as  parcels  by  the 
post  this  year,  certainly  not  less  than  one  hundred  and  fifty 
millions;  and  yet  only  about  fifty  millions  of  these  have  been 
taken  from  the  express  companies.  The  low  postal  rates  have 
had  the  effect  of  creating  new  traffic  to  the  extent  of  trebling 
or  quadrupling  the  former  traffic. 

Telegraph  Rates 

The  present  telegraph  tariffs,  beginning  with  a  minimum  of 
25  cents  for  10  words,  are  graduated  for  increasing  distances 
in  multiples  of  5  cents  up  to  50,  whence  the  rate  is  60,  75  cents, 
and  $i.  The  additional  word  rates  correspondingly  rise  from 
2  cents  to  3,  4,  5,  and  7  cents,  respectively.  These  rates  yield 
now  an  average  on  the  message  of  from  38  to  40  cents.  Special 
rates  are  given  the  press  on  individual  messages  as  set  forth 
in  an  appendix;  while  the  great  body  of  the  news  is  handled 
by  the  press  associations  over  leased  wires,  for  which  the  tele- 
graph company  is  commonly  paid  $20  per  mile  per  annum,  the 
association  supplying  its  own  operators.  The  data  are  insuffi- 
cient to  permit  an  opinion  as  to  the  merit  of  this  lease  rate, 
but  since  it  is  a  wholesale  rate  it  is  not  so  likely  to  be  excessive 
as  the  individual  message  rates. 

We  have  seen  that,  differing  from  our  postage  rates,  which 
are  quite  as  low,  the  telegraph  rate  here  averages  about  twice 
on  the  shorter,  and  on  the  longer  distances  from  three  to  four 
times  as  high  as  in  other  countries. 


TELEGRAPH   AND   TELEPHONE  75 

[Table  21  gives  the  comparative  rates  of  the  United  States 
and  other  countries  per  telegram  and  the  number  per  capita.] 

Thus,  in  Germany  the  rate  is  12  cents  and  I  cent,  with  pos- 
sible distances  of  700  miles.  In  the  United  States  the  rate  for 
a  like  distance  would  average  50  cents.  There  are  a  few  for- 
eign rates  lower  than  the  German,  but  it  represents  a  mean  for 
postal-telegraph  countries,  including  New  Zealand,  with  its 
American  wage  levels.  It  is  not  believed  that  a  flat  rate  for 
all  distances  in  a  country  so  large  as  the  United  States  could 
be  made  compensatory  without  making  it  too  high  for  the 
shorter — as  it  is  in  Russia — and  too  low  for  the  extreme  distances 
of  which  our  country  abounds.  Tentatively,  it  is  proposed  to 
adopt  the  12-cent  minimum,  plus  a  cent  per  additional  word, 
which  is  typical  for  postal  systems,  the  12  cents  to  embrace  but 
12  words,  counting  address  and  signature.  This  rate,  it  is  pro- 
posed, shall  be  effective  for  200  miles.  For  greater  distances  a 
rate  scale  based  on  the  declension  of  freight  rates  for  increasing 
distances  is  suggested.  Broadly  regarded,  the  railway  class 
rates  double  as  the  distance  quadruples;  or,  stated  in  mathe- 
matical terms,  the  rate  increases  in  proportion  to  the  increase 
of  the  square  root  of  the  mileage  of  the  journey.  This  law  is 
a  recognition  of  the  fact  that  the  terminal  service  does  not  in- 
crease with  the  lengthening  haul,  a  fact  which  would  seem  to 
be  of  even  greater  importance  for  increasing  telegraph  and  tele- 
phone message  journeys.  Applying  this  law  to  the  telegraph 
message,  we  should  have  a  result  as  follows : 

Twelve  cents,  up  to  200  miles. 

Twenty-four  cents,  up  to  800  miles. 

Forty-eight  cents,  up  to  3,200  miles. 

But  the  above  table,  which  is  merely  expository,  contains 
only  three  jumps  from  coast  to  coast,  while  the  telegraph  com- 
panies have  found  it  prudent  to  have  not  less  than  eight,  from 
their  25-cent  to  their  $i  charge,  for  the  most  part  representing 
increases  of  5  cents  per  advance.  The  scale  following  is  there- 
fore presented  as  supplying  the  necessary  gradations.  [See 
Table  22,  page  76.] 

It  is  thought  that  the  day  and  night  letter  services  adapted  to 
the  above  rates  should  be  retained,  in  order  that  the  wires  be 
utilized  during  otherwise  idle  hours  of  the  day  and  night,  and 


76  GOVERNMENT   OWNERSHIP   OF 

to  these  should  be  added  a  new  species  of  telegram,  auxiliary  to 
the  long-distance  conversation.  I  call  it  the  phone-appointment 
telegram,  say,  at  a  flat  cent-a-word  rate,  to  be  used  by  parties 
in  fixing  a  definite  moment  for  long-distance  talks.  Much  time 
and  annoyance,  it  would  seem,  might  be  saved  thus  to  the  parties 
themselves  as  well  as  otherwise  wasted  plant  and  personnel  in 
the  preliminaries  of  the  attempt  to  connect  long-distance  parties. 

TABLE   22 


Cents. 
12 

Ad« 

Miles. 

200 

aitional 
word. 
Cents. 
1 

1 
1 
1 
2 
2 
2  . 

18      , 

500 

24  

800 

30 

1  400 

36 

2,000 

42  

2,600 

48.. 

3.200 

The  above  tariffs  would  average  a  little  less  than  one-half  of 
the  present  telegraphic  rates,  and  it  is  thought  would  produce  an 
average  receipt  of  25  cents,  somewhat  exceeding  the  average 
2i-cent  receipt  for  Denmark  on  a  flat  13-cent  minimum  and 
i^-cent  additional  word  rate.  Such  rates,  when  taken  in  connec- 
tion with  the  extension  of  the  service  to  all  the  post  offices, 
homes,  and  offices  reached  by  the  telephone  wires,  could  hardly 
fail,  ultimately,  to  render  effective  the  maximum  of  business 
and  social  demand  for  this  form  of  correspondence.  Surely  such 
a  development  is  due  us.  The  people  of  the  United  States  exceed 
all  others  in  the  number  of  letters  per  capita  on  identical  postal 
rates.  It  is  humiliating  to  think  that  we  must  occupy  but  the 
eighth  place  among  the  nations  in  the  degree  of  use  made  of  the 
wonderful  telegraph  agency.  Great  Britain,  Switzerland,  France, 
Norway,  Denmark,  Belgium,  and  the  Netherlands,  all  with  lower 
wage  levels  than  ours,  precede  us  in  this  respect,  while  New 
Zealand,  with  wage  conditions  like  our  own,  manages  to  extend 
its  average  citizen  eight  times  the  telegraph  service  we  get  here. 
And  this  has  been  done  for  a  generation.  Surely  the  country 
has  paid  enough  for  its  tory  statesmen  and  monopolistic  finan- 
ciers. 

The  toll  telephone  rate:  It  has  been  said  that  the  telegraphs 
have  word-miles  for  sale,  and  that  the  limit  of  their  capacity 


TELEGRAPH   AND   TELEPHONE  7? 

might  only  be  reached  when  the  best  word-sending  devices  were 
fully  occupied  in  transmitting  words  over  every  mile  of  their 
wire.  It  is  equally  true  that  the  telephone  agency  has  mile- 
minutes  to  sell,  and  that  its  theoretical  limit  is  only  reached 
when  every  wire  is  conveying  a  conversation  every  moment  dur- 
ing the  year.  Such  is  the  theory.  In  fact,  during  sleeping  hours, 
say  from  12  to  6  a.  m.,  there  can  be  but  a  very  reduced  demand. 
The  conversation  unit  is  three  minutes  in  all  countries,  and  ac- 
cording to  the  reports  of  the  Bell  Co.  the  time  consumed  in  mak- 
ing the  connection  and  the  conversation  runs  from  five  to  seven 
minutes.  Taking  the  average  as  six  minutes,  if  a  circuit  were, 
theoretically,  in  constant  use  throughout  the  year,  87,500  conver- 
sations might  take  place.  The  German  toll  and  long-distance 
network  consists  of  19,623  circuits,  while  the  Bell  Co.'s  net- 
work reaching  about  the  same  number  of  people,  appears  to  be 
33,164.  The  number  of  conversations  per  circuit  in  Germany 
was  16,417  in  1910,  while  on  the  American  system  the  average 
was  but  7,164.  It  is  pertinent  to  remark,  however,  that  the 
average  charge  in  Germany  was  less  than  4  (0.036)  cents,  while 
in  the  United  States  it  was  over  19  (0.192)  cents.  The  German 
rates  were  effective  to  induce  traffic  equal  to  one  conversation 
to  each  31  minutes,  or  19  per  cent  of  the  theoretically  available 
phone  time ;  while  the  American  rates  produced  one  conversation 
to  each  73  minutes,  or  a  utilization  of  about  8  per  cent  of  such 
time.  The  low  utilization  in  the  United  States  is  indubitably 
the  result  of  her  higher  rates — over  five  times  those  of  Germany. 
This  low  utilization  is  made  a  matter  of  observation,  if  not  of 
complaint,  in  the  reports  of  the  American  system. 

Unlike  the  telegraphic  agency,  where  the  press  and  the  night 
letter  largely  preserve  the  nighttime  from  waste,  while  the  day 
letter  may  use  the  idle  moments  of  the  day,  little  has  been 
done  in  the  United  States  to  distribute  the  distance  telephone 
traffic  equally  throughout  even  the  day  hours.  In  Germany 
considerable  effort  has  been  made  to  effect  such  a  distribution. 
There  are  rates  for  urgency  or  immediate  demand  service,  rates 
for  regular  subscribers  at  given  hours,  regular  day  and  regular 
night  rates,  and  monthly  contract  rates. 

Under  the  operation  of  postal  motives  it  would  be  interesting 
to  sketch  the  possibilities  of  the  use  which  might  be  made  of 


78  GOVERNMENT   OWNERSHIP   OF 

the  waste  hours  from  12  p.  m.  to  6  a.  m.  A  purely  fanciful 
case  is  presented  for  illustration.  The  mother  lives  in  New 
York  and  her  daughter  in  Chicago.  The  scale  rate  is  now  $6 
for  a  three-minute  talk,  and  this  talk,  purely  domestic,  never 
takes  place  between  poor  people.  But  the  wires  are  idle,  and 
in  Germany  the  rate  would  be  but  48  cents.  Why  not  permit  the 
use  of  the  lines  during  midnight  hours  at  that  rate  for  such 
purpose? 

In  another  part  it  is  shown  that  the  total  cost  of  maintaining 
and  operating  the  interurban  telephonic  network  for  telegraphic 
and  telephonic  uses  would  be  about  $80,000,000.  If  half  of  this 
represented  the  telephonic  share,  the  cost  per  mile  of  wire,  ex- 
change service  included,  would  be  at  the  rate  of  $13,333  per  1,000 
miles.  The  New  York  to  Chicago  wire  measures  about  1,000 
miles,  and  with  return  wire  2,000  miles;  thus  the  half  annual  cost 
of  maintenance  and  operation  would  be  $26,666,  or  about  30  cents 
per  six-minute  period,  counting  every  moment  of  the  year.  These 
figures  are  not  to  be  taken  as  accurate,  or  even  approximate,  and 
yet  it  is  asserted  that  the  true  figure,  when  secured,  will  not 
differ  enough  to  impair  the  case. 

The  truth  is  that  the  German  rate,  while  not  seductive  to  him, 
might  well  be  introduced  during  these  midnight  hours,  if  the 
private  financier  did  not  fear  the  effect  in  two  directions.  It 
would  call  attention  to  the  abnormal  day  rate,  some  ten  times 
as  high,  and  might  divert  a  serious  proportion  of  the  high-priced 
day  traffic  to  the  cheaper  service.  Perhaps  it  might  have  been 
wiser  for  the  gentlemen  controlling  these  really  postal  agencies 
to  have  taken  the  public  into  their  confidence  and  formulated 
rates  designed  to  secure  the  maximum  utilization  of  their 
plants,  even  if  their  rates  at  first  appeared)  utterly  incongruous. 
But  they  are  not  sure  that  it  would  be  wise.  Nor,  indeed,  can 
it  be  very  certain  that  their  fears  are  groundless,  considering 
the  state  of  ignorance  and  indifference  which  has  permitted 
the  agencies  to  fall  into  private  hands  at  all.  Their  patriotic 
night  rates  might  indeed  be  made  the  false  basis  of  a  demand 
for  irrational  day  rates. 

The  basis  for  a  long-distance  rate,  it  is  believed,  would  include 
(i)  the  total  number  of  messages  likely  to  be  transmitted  on  a 
given  rate — the  experience  of  other  countries  would  afford  ap- 


TELEGRAPH   AND   TELEPHONE  79 

proximate  means  of  computing  them;  (2)  the  total  cost  of 
service  divided  into  units  of  mile-minutes;  (3)  the  graduation 
of  rates  for  the  different  hours  of  the  day  and  night  to  cor- 
respond with  the  relative  desirability  as  determined  by  traffic 
demands ;  (4)  the  distribution  of  wasted  or  unused  plant  values 
into  special  hour  rates  in  a  way  the  least  deterrent  to  the  de- 
mand for  the  service.  Doubtless  it  would  require  considerable 
experimentation  by  the  postal  department  to  acquire  data  for 
the  use  of  these  bases,  but  the  postal  system  would  have  a 
motive  to  experiment,  and  it  could  rely  on  the  support  of  the 
public  in  its  efforts. 

Expository  toll  rates:  With  the  object  rather  of  stating  the 
conditions  of  the  problems  connected  with  the  long-distance 
rates,  I  am  presenting  a  tentative  tariff  for  the  different  dis- 
tances up  to  1,000  miles.  Two  administrative  purposes  are 
sought  to  be  realized,  the  utilization  of  the  blank  period  be- 
tween 12  m.  and  6  a.  m.,  and  the  comparatively  blank  period 
from  6  to  9  a.  m.,  as  also  from  8  p.  m.  to  12  m.,  in  the  telephonic 
plant  day  of  24  hours.  Conversely,  it  is  sought  to  cut  down  the 
traffic  peaks  one-half  between  the  hours  of  9  a.  m.  and  12  m. 
and  6  p.  m.  and  8  p.  m. 

It  is  obvious  that  if  the  blanks  could  be  partly  filled  by  new 
traffic  such  business  would  represent  nearly  all  gain  to  the 
postal  department.  It  is  equally  obvious,  of  course,  that  if 
future  increases  of.  traffic  during  peak  periods  could  be  di- 
verted to  the  comparatively  blank  periods  by  sufficiently  at- 
tractive rates,  a  business  from  three  to  four  times  that  now 
done  could  be  accomplished  on  the  present  capacity  of  the  wires. 
Theoretically  the  rates  should  rise  with  the  degree  of  the  de- 
mand and  fall  with  it  in  order  to  scatter  or  distribute  the  traffic 
as  nearly  equally  over  the  24  hours  as  possible,  and  thus  secure 
the  maximum  effective  capacity  of  the  plant.  With  a  view 
to  illustrate  rather  than  to  propose  methods  for  this  purpose 
the  following  tariff  is  presented. 

[Table  23  gives  the  long-distance  rates,  per  3-minute  con- 
versation, during  different  periods  of  the  day.] 

The  busy-hour  rates  could  be  very  much  further  reduced  in 
the  event  that  the  schedule  proved  effective  in  more  equally 
distributing  the  traffic.  It  is  for  this  purpose  that  the  urgency 


8o  GOVERNMENT   OWNERSHIP    OF 

rates  are  made  so  high ;  for  the  five  busy  hours  they  are  as  high 
as  at  present.  Doubtless  there  is  a  body  of  demand  that  cares 
not  for  the  highness  of  the  rate — most  of  the  present  patronage, 
perhaps — if  it  can  secure  quick  and  instantaneous  service.  This 
character  of  service  is  called  "urgent"  in  Germany,  and  pays 
three  times  the  regular  rate  for  its  preference  over  the  regular 
traffic. 

The  rates  outlined  are  of  seven  varieties :  The  midnight  rate 
for  social  objects  slightly  exceeding  the  German  day  rate;  the 
6-to-p  morning  rate  and  the  8-to-i2  night  rate,  designed  to 
attract  traffic  from  peak  periods;  the  9  a.  m.  to  12  m.  and  the 
6  to  8  p.  m.,  or  peak  periods,  with  the  rates  purposely  left 
high  to  divert  excess  demands  at  those  hours  to  other  periods; 
the  urgent  or  quick-service  rates;  the  Sunday  rates  for  social 
uses;  and  the  one-half  or  one-sixth  per  minute  additional  rate, 
for  overtime,  which  corresponds  to  the  first  three-minute  rate 
since  the  additional  allowance  of  three  minutes  for  making  the 
connection  is  included  in  the  first  charge. 

It  will  require  some  years  of  experimentation  to  determine 
just  what  graduation  of  rates  to  busy  and  nonbusy  periods  of 
the  day  and  night  will  secure  the  highest  attainable  utilization 
of  the  plant;  and  the  consummation  of  the  lowest  rates  must 
await,  and  is  dependent  on,  such  a  degree  of  utilization.  Mean- 
while the  present  rates,  under  the  above  schedule,  run  from  but 
one-fifth  to  two-thirds  of  the  existing  rates,  with  it  is  believed  a 
substantial  enlargement  of  plant  capacity  during  peak  demands. 
Even  if  our  long-distance  traffic  carries  a  rate  four  times  nor- 
mal, and  the  public  service  is  at  perhaps  but  one-fourth  of  its 
potential,  yet  normal,  though  compensatory,  rates  would  not  be 
practicable  if  the  effect  was  only  to  exaggerate  the  peaks  and 
thus  perhaps  require  immediate  additions  to  the  plant,  although 
its  average  utilization,  as  shown,  might  be  but  a  paltry  8  per 
cent  of  its  total  capacity.  Time  and  experiment  only  will 
qualify  the  rate  maker  to  formulate  the  most  desirable  rate 
structure. 

Comparison  of  Probable  Receipts  and  Expenditures 

It  may  be  of  interest  to  ascertain  how  the  account  would 
have  stood,  say  for  1912,  had  the  telephones  been  under  postal 


TELEGRAPH   AND   TELEPHONE  81 

management,  with  the  telegraph  function  added.  Taking  the 
receipts  and  expenditures  of  the  Bell  system  for  that  year  and 
adding  those  of  the  independents — estimated,  Bell  equals  71  per 
cent,  independents  equals  29  per  cent — and  adding  also  the  re- 
ceipts and  expenditures  which  the  superimposing  of  the  tele- 
graph traffic  of  the  telephone  network  would  have  involved,  we 
should  have  the  following  statement: 

[Table  24  gives  figures  for  receipts,  expenditures  and  bal- 
ance.] 

The  above  table  substantially  reflects  what  the  postal  budget 
for  1912  would  have  been  had  it  conducted  the  telephone  and 
telegraph  services  over  the  telephone  network  upon  the  exist- 
ing telephone  rates,  supplemented  by  the  telegraph  rates  pro- 
posed. It  is  plain  enough  that  the  department  will  be  on  safe 
financial  ground,  with  a  surplus  of  a  third  of  its  receipts  to 
apply  to  the  extension  of  the  service  to  the  farmside  and  the 
homes  of  the  masses. 

Against  this  alluring  balance  of  more  than  one  hundred  mil- 
lions it  will  be  urged  that  the  statement  takes  no  account  of 
the  higher  wages  which  the  postal  system  would  have  paid. 
Granted;  its  scale  would  have  been  higher.  But  as  a  future 
factor  it  is  submitted,  as  the  judgment  of  the  telephone  engi- 
neers, that  the  reduction  of  the  personnel  concomitant  with  the 
certain  introduction  of  the  automatic  phone  much  more  than 
meets  the  difference  between  private  and  postal  wages. 

Summary  of  Benefits 

Let  us  see  what  our  reasoning  supports  as  the  advantages  to 
be  ultimately  derived  from  a  postalization  of  the  telephonic  net- 
work. 

(a)  A  cent  a  word  telegram. 

(b)  Long-distance  rates   from  one-half  to   one-fourth  those 
prevailing. 

(c)  A  cent  a  call,  local  conversation. 

(d)  Universal  use  of  the  telephone. 

Only  item  (d)  presents  an  achievement  not  already  attained 
in  other  countries;  i.  e.,  the  phone  in  every  man's  house.  But 
with  item  (c)  within  reach  our  American  wage  levels  offer  the 
highest  assurance  that  a  service  so  cheap  and  necessary  will 
become  as  universal  as  the  letter  service. 


82  GOVERNMENT   OWNERSHIP    OF 

I  distinguish  the  difficulties  which  attach  to  any  constructive 
program  from  objections  which  take  the  character  of  funda- 
mental defects  in  the  proposal  itself.  Such  difficulties,  for 
example,  as  the  inconvenience  of  financing  the  project,  the 
adjustments  and  readjustments  necessary  to  secure  the  desirable 
properties  in  the  rates,  the  extensions  of  the  network  to  meet 
additional  demands,  the  addition  to  the  postal  service  of  the 
numerous  personnel  essential  to  the  conduct  of  correspondence 
by  wire,  and,  finally,  the  effect  of  competition  by  the  postal 
telegraph  on  the  telegraph  lines  in  private  hands,  all  of  which 
may  be  difficulties  and  yet  not  objections.  It  is  meant  to  meet 
these  in  an  absolutely  frank  way,  and  so  I  shall  take  them  up 
in  their  order. 

Financing  the  acquisition :  It  is  assumed  that  the  acquisition 
of  the  total  telephone  network,  embracing  local  exchanges,  toll, 
and  long-distance  lines,  would  cost  about  nine  hundred  millions 
of  dollars.  The  purchase  would,  of  course,  be  financed  by  the 
issue  of  government  bonds.  The  question  presented  is,  there- 
fore, whether  the  marketing  of  this  amount  of  bonds  would  be 
so  difficult  as  to  render  the  proposition  undesirable. 

Great  financing  enterprises  during  recent  years  have  been  as 
follows : 

The  Panama  Canal. 

The  United  States  Steel  Co. 

Acquisition  of  the  railways  by  Japan. 

Acquisition  of  the  railways  by  Switzerland. 

Acquisition   of  one-third  of  the  railways  by  France. 

Acquisition  of  the  national  telephone  network  of  Great  Britain. 

The  plan  would  not  involve  the  compensation  of  the  owners 
in  one  gross  payment  or  at  one  time.  While  it  would,  of  course, 
be  necessary  to  acquire  title  and  possession  of  the  networks  by 
a  single  process  of  statutory  appropriation,  and  on  the  same 
day,  it  by  no  means  follows  that  payment  for  the  properties 
would  or  could  be  invoked  in  the  same  total  or  single  way. 
There  are,  altogether,  some  3,000  companies  or  distinct  legal 
proprietorships  of  the  network,  and  even  the  Bell  associated 
companies  number  more  than  200.  There  would,  therefore,  be 
as  many  distinct  payments  as  there  are  different  proprietorships. 
Moreover,  these  payments  would  naturally  extend  over  a  pe- 
riod of  time  sufficiently  long  to  enable  the  Interstate  Commerce 


TELEGRAPH   AND   TELEPHONE  83 

Commission  to  make  its  appraisals  and  the  courts  to  adjust  such 
legal  questions  as  to  valuation  as  may  arise.  It  is  thus  ap- 
parent that  the  payments  would  be  distributed  throughout  a 
period  of  several  years  and  be  decentralized  into  as  many  acts 
of  payment  as  there  are  distinct  legal  owners. 

Resume 

To  be  brief,  the  investigation  discloses  that  our  telegraphic 
rates  are  the  highest  among  20  countries,  running  from  25  cents 
to  $i,  while  in  other  countries  they  average  about  12  cents,  or  a 
cent  a  word.  The  result  of  these  abnormal  rates  is  that  we  rank 
but  ninth  as  telegraph  users,  with  one  and  one-tenth  telegrams 
per  person  to  our  credit  per  annum,  while  in  New  Zealand,  with 
the  i2-cent  rate  and  our  price  and  wage  levels,  the  use  of  the 
telegraph  reaches  as  high  as  eight  telegrams  per  person. 

Against  these  conditions  it  appears  that  our  postal  rates 
average  lower  than  other  countries,  and  that  the  number  of 
letters  here — 101  per  person — is  the  highest  in  the  world. 

The  telegraph  companies  seem  to  be  lacking  in  institutional 
economy  or  efficiency.  The  operation  of  sending  a  telegram 
is  loaded  down  with  74  incidental  services  and  processes,  not 
less  than  50  of  which  would  be  replaced  by  affixing  the  postage 
stamp.  Notwithstanding  they  have  the  greatest  business  per 
office,  yet  their  daily  product  is  less  than  10  telegrams  per  em- 
ployee, even  less  than  that  of  New  Zealand,  which  has  less 
than  one-third  the  business  per  telegraph  office.  The  American 
inefficiency  is  further  exaggerated  by  the  duplication  of  tele- 
graph offices  in  all  the  important  towns  and  cities,  and  the  denial 
of  the  service  at  many  thousand  necessary  points. 

A  striking  feature  is  the  discovery  that  the  telegraph  service 
is  a  relatively  declining  institution,  and  that  it  would  be  un- 
wise now  to  postalize  it  alone  and  as  a  single  service.  For  10 
years  in  England  the  number  of  telegrams  has  been  actually 
stationary.  To  take  over  the  telegraph  lines  alone  and  operate 
them  merely  as  telegraph  lines  might  result  in  postal  bank- 
ruptcy. Separated  from  the  telephone,  they  are  not  now  surely 
self-sustaining  as  mere  telegraphs.  Because  you  would  rather 
talk  than  write  to  a  person,  you  use  the  telephone  rather  than 
the  telegram,  if  the  rates  permit.  In  Germany,  where  both 


84  GOVERNMENT   OWNERSHIP    OF 

telegraph  and  telephone  rates  are  normal,  there  are  five  times 
as  many  toll  or  long-distance  conversations  as  there  are  tele- 
grams, and  even  in  the  United  States  from  two  and  one-half 
to  three  times  as  many.  There  would  be  no  advantage  in  taking 
over  the  telegraph  lines;  the  investigation  makes  this  clear. 

But  our  toll  and  long-distance  rates  compare  with  those  of 
other  countries  even  less  favorably  than  do  our  telegraph  rates. 
The  average  interurban  receipt  in  Germany  is  but  4  cents ;  here 
it  averages  20  cents.  The  long-distance  rates  here  are  made  on 
a  scale  of  6  mills  a  mile  per  three-minute  conversation,  as  against 
an  average  charge  of  about  7  mills  a  mile  received  by  the 
railways  for  transporting  a  ton  of  freight.  The  average  charge 
on  the  Continent  for  a  30O-mile  talk  is  30  cents;  here  it  is  $1.80, 
or  six  times  as  great.  It  is  not  unfair,  or  inaccurate,  to  say  that 
the  American  interurban  telephone  rates  are  the  scandal  of 
public-service  rates  the  world  over.  The  American  telephone 
monopoly  takes  the  thirteenth  place  only  among  17  countries 
with  regard  to  the  lowness  of  these  rates. 

With  respect  to  local  telephone  exchange  rates,  we  have  three 
main  divisions,  the  farmers'  lines,  which  cost  the  average  sub- 
scriber about  a  half  cent  a  call ;  the  independents,  which  cost  a 
little  over  i  cent  a  call,  but  usually  with  the  half  service  per- 
mitted by  telephone  competition;  and  the  local  rates  of  the  Bell 
monopoly,  which  average  a  little  more  than  2  (2.10)  cents  per 
call,  or  just  twice  the  average  charge  in  other  countries.  While 
our  postal  rates  give  us  the  first  rank  in  lowness  of  charges, 
this  company  ranks  but  fourteenth  among  16  countries  with  its 
local  charges,  and  we  are  one  of  three  countries  where  the  charge 
per  local  call  exceeds  the  letter-postage  rate;  the  other  13  coun- 
tries giving  a  much  lower  charge  per  phone  call  than  their  letter 
rates. 

The  subscribers'  rates  in  American  cities,  compared  with  con- 
tinental cities,  are  about  three  times  as  high.  For  example,  New 
York,  where  5,400  calls,  about  15  per  day,  under  a  measured 
service  tariff  cost  more  than  the  four  unlimited  yearly  rates  of 
London,  Paris,  Berlin,  and  Stockholm  together.  For  like  serv- 
ices, Baltimore  people  pay  more  than  the  rates  for  London  and 
Paris  combined,  and  Washington  pays  as  much  as  the  five  cities 
of  Amsterdam,  Rotterdam,  Auckland,  Tokyo,  and  Copenhagen 


TELEGRAPH   AND   TELEPHONE  85 

combined.  In  postal-telephone  countries  the  local  toll  tariffs 
tend  to  run  about  one-half  the  charge  for  a  letter,  while  here  it 
runs  with  the  street  car  fare,  and  sometimes  exceeds  it,  when 
it  is  three  times  the  letter  rate. 

While  competition  does  not  supply  a  remedy  because  it  di- 
vides the  service  and  necessitates  the  payment  for  two  phones, 
yet  it  throws  an  interesting  side  light  on  the  tendency  of  a  private 
monopoly  to  jack  up  the  rates.  Thus  of  60  of  the  great  Ameri- 
can cities,  24  averaging  342,486  in  population,  pay  an  average 
annual  phone  rate  of  $53  under  competition;  while  the  other  36 
cities,  averaging  but  188,629  in  population,  without  competition, 
pay  an  average  rate  of  $81.  Since  competition  can  only  aug- 
ment the  total  cost  of  operation  it  is  apparent  how  private 
monopoly  and  high  rates  go  hand  in  1  and. 

Telephone  development  has  reached  its  substantial  limits  in 
the  United  States  under  private  capital  with  the  extension  of 
the  service  to  the  very  profitable  office  and  well-to-do  home 
traffic.  To  extend  it  to  the  homes  of -the  masses,  as  the  public 
roads  and  postal  service  now  are  extended,  the  postal  agency  is 
necessary.  If  the  telephone  Jines  are  postalizcd,  both  the  tele- 
phone and  telegraph  business  can  be  done  over  them,  as  in  other 
countries,  where  a  telegram  and  a  conversation  go  over  the 
same  wire  at  the  same  time.  It  will  be  unnecessary  to  take  over 
the  telegraph  lines  here  (capitalized  at  $240,000,000)  ;  as  both 
kinds  of  communication  can  be  handled  on  the  telephone  wires, 
which  exceed  the  telegraph  wires  in  mileage  and  geographical 
distribution. 

The  telegraph  lines  would  have  to  be  substantially  recon- 
structed to  add  a  telephone  business  to  them,  while  the  addition 
of  the  telegraph  instruments  to  the  telephone  wires  may  be 
accomplished  at  a  negligible  total  cost.  This  circumstance  shows 
the  weakness  of  private  monopoly.  Instead  of  duplicating 
the  telegraph  network  with  a  separate  toll  and  long-distance 
system  as  the  American  Telephone  &  Telegraph  Co.  has  done, 
the  postal  telegraph  countries  have  made  the  one  network  serve 
for  both  functions,  by  articulating  the  telegraphic  with  the  tele- 
phone exchanges. 

The  cost  of  acquiring  the  telephone  networks  is  indicated  as 
something  less  than  $900,000,000,  for  which  it  is  proposed  to 
issue  3  per  cent  bonds,  payable  in  50  years.  It  is  calculated 


86  GOVERNMENT   OWNERSHIP    OF 

that  the  postal  system  by  superimposing  the  telegraph  service 
on  the  telephone  lines  at  half  present  telegraph  rates  may  net 
some  fifty  millions  annually  from  that  traffic  alone,  which  with 
the  present  profits  of  the  telephones,  and  after  the  deduction 
of  interest  on  the  bonds  and  depreciation,  would  supply  the  de- 
partment with  a  large  surplus  for  extensions,  and  so  forth. 

The  telephone  rates  should  be  worked  out  experimentally  by 
the  Post  Office  Department  in  a  few  years,  with  the  assured 
prospect  of  ultimately  securing  telephone  and  telegraph  rates, 
like  our  letter  rates,  as  low  as  those  abroad.  That  is,  rates 
about  half  those  now  obtaining  for  the  telegraph  and  local 
telephone  services,  and  about  one-fourth  those  charged  for  the 
long-distance  telephone  conversation  Our  other  postal  rates, 
including  the  highly  profitable  parcel-post  rates,  have  been  made 
as  low  as  in  other  countries,  and  the  indications  are  that  like 
results  can  be  obtained  for  the  wire  service  when  postalized. 

The  suggestion  that  the  interurban  and  long-distance  lines 
alone  be  postalized  and  the  telephone  exchanges  be  left  to  the 
municipalities  is  found  to  be  unsound.  The  postal  system  can 
finance  and  operate  the  exchange^  the  more  economically  and 
efficiently,  and  the  divorcement  of  the  exchanges  from  the  inter- 
urban  and  long-distance  lines  would  necessitate  the  maintenance 
of  two  personnels  at  substantially  increased  cost.  It  would  be 
like  divorcing  the  local  post  offices  from  the  Post  Office  Depart- 
ment and  turning  them  over  to  the  mayors  to  run.  The  towns 
and  cities  have  enough  to  do  if  they  give  proper  attention  to 
those  utilities  which  are  distinctly  local.  Moreover,  the  farms 
and  countryside  villages  which  are  without  local  administrative 
governments  would  not  be  reached  by  a  municipal  service. 

The  financing  of  .the  acquisition  and  the  valuations  of  the 
properties  would  cover  several  years;  ana  while  the  properties 
should  be  taken  at  one  time  with  their  personnel  and  system- 
atized, the  payments  for  them  would  have  to  await  the  final 
valuations  by  the  Interstate  Commerce  Commission,  the  Treas- 
urer paying  the  owners  4  per  cent  interest  quarterly  during  the 
interim.  The  financing  would  thus  be  decentralized  into  as 
many  payments  as  there  are  distinct  legal  ownerships.  It  is 
not  thought  this  financing  would  involve  difficulties  seriously 
greater  than  those  of  the  Panama  Canal.  Switzerland  has  re- 


TELEGRAPH   AND   TELEPHONE  87 

cently  successfully  financed  the  purchase  of  her  railways, 
amounting  to  about  $50  per  capita,  while  the  telephone  acquisi- 
tion here  would  be  less  than  $10. 

With  respect  to  management,  it  is  found  that  our  postal  sys- 
tem is  highly  efficient.  It  ranks  next  to  the  highest — Belgium — 
among  16  countries,  and  perhaps  is  actually  in  advance  of  her. 
Our  product  per  average  postal  employee  in  1912  was  over 
60,000  mail  pieces  per  man,  as  compared  with  Germany  at 
37,000  and  France  at  34,000,  countries  which  rank  eighth  and 
tenth,  respectively,  in  postal  efficiency.  In  the  matter  of  tele- 
grams handled  per  employee,  our  companies  are  outranked  by 
New  Zealand,  notwithstanding  the  concentration  of  the  tele- 
graph business  in  a  relatively  few  offices  here.  The  Bell  tele- 
phone monopoly  ranks  but  ninth  in  operative  efficiency  among 
16  countries.  In  1912  it  handled  58,000  telephone  calls  per  em- 
ployee, as  against  149,000  per  employee  in  Norway.  This  is 
mainly  because  its  abnormal  rates  condemn  the  operative  plant 
to  comparative  idleness — its  interurban  lines  show  but  8  per 
cent  of  utilization  as  against  19  per  cent  in  Germany — while 
the  number  of  operators  engaged  in  maintenance  and  other 
services  remains  the  same,  whether  the  phones  are  actively  or 
but  sparingly  used.  The  postal  system  with  normal  rates 
might  easily  double  the  Bell  efficiency  in  number  of  calls  per 
employee,  and  the  independents  do  better  it  by  nearly  50  per 
cent  on  account  of  their  lower  rates  and  consequent  higher 
utilization  of  plant  and  personnel.  With  the  number  of  calls 
thus  doubled,  the  expense  per  call  would  be  practically  reduced 
one-half,  and  it  may  thus  be  seen  what  the  postal  motive  could 
accomplish  -  in  rate  reduction  without  substantial  increase  of 
expense.  This  illustrates  the  natural  infirmities  of  private 
monopoly,  which  is  without  a  motive  to  double  the  service  even 
where  expenses  and  profits  will  remain  the  same. 


88  GOVERNMENT   OWNERSHIP   OF 

United  States.  6ad  Congress.  2d  Session.  Senate  Document 
No.  399.  Government  Ownership  of  Electrical  Means  of 
Communication. 

A  report  to  the  Postmaster  General,  entitled  "Government 
Ownership  of  Electrical  Means  of  Communication,"  prepared  by 
a  committee  of  the  Post  Office  Department. 

Relation   of    Telegraph   and    Telephone -Systems   to    the   Postal 

Service 

The  founders  of  this  nation  were  keenly  alive  to  the  impor- 
tance of  keeping  exclusively  under  government  control  all  means 
of  communication,  and  therefore  provided  in  the  Constitution 
that  "the  Congress  shall  have  the  power  ...  to  establish 
post  offices  and  post  roads." 

The  framers  of  the  Constitution  probably  never  dreamed  of 
postage  stamps,  railway  postal  cars,  canceling  machines,  pneu- 
matic tubes,  telegraphs,  telephones,  aeroplanes,  and  radio  equip- 
ment. They  specified  nothing  concerning  means  of  transporta- 
tion or  methods  of  distribution,  but  wisely  left  to  future  genera- 
tions a  broad  provision  under  which  they  would  have  the  right 
to  avail  themselves  of  such  improved  means  of  communication 
as  might  be  discovered  and  developed.  It  was  clearly  their 
intention  that  the  Government  should  control  all  means  for  the 
transmission  of  intelligence. 

Under  government  control  the  postal  service  of  our  country 
has  prospered,  expanded,  and  developed  to  its  present  high  state 
of  working  and  economical  efficiency,  adopting  in  the  course  of 
its  growth  practically  every  means  of  transmitting  intelligence 
except  electricity.  The  service  has  gone  hand  in  hand  with  the 
advance  guard  of  civilization.  Its  facilities  have  been  extended 
to  the  smallest  and  remotest  towns  and  villages  in  our  land,  not 
with  regard  to  cost  or  with  an  eye  to  profit,  but  with  the  sole 
purpose  of  serving  the  needs  of  the  people  irrespective  of  wealth 
or  position. 

The  United  States  alone  of  the  leading  nations  has  left  to 
private  enterprise  the  ownership  and  operation  of  the  telegraph 
and  telephone  facilities. 

In  1843  this  Government  aided  in  the  construction  and  as- 
sumed as  a  part  of  its  postal  duties  the  operation  of  the  first 


TELEGRAPH   AND   TELEPHONE  89 

electric  telegraph.  But  on  March  4,  1847,  because  of  the  unwill- 
ingness of  Congress  to  authorize  any  extension  of  the  service 
then  in  operation  and  because  of  a  deficit  in  the  postal  finances, 
the  control  of  this  facility  was  surrendered  to  private  hands. 
However,  in  1866,  Congress,  aware  of  the  danger  of  permitting 
this  service  to  remain  under  private  control  in  view  of  its  inti- 
mate relation  to  the  postal  service,  asserted  that  the  facility  was 
within  the  purview  of  the  constitutional  provision  for  the  postal 
establishment,  and  enacted  legislation  looking  to  the  acquisition 
by  the  Government  of  all  telegraph  lines. 

With  an  indecision  that  is  to  be  regretted  the  fulfillment  of 
this  commendable  purpose  was  deferred  for  a  period  of  five 
years  in  order  that  the  telegraph  monopoly  might  during  that 
time  be  indemnified  by  the  continued  enjoyment  of  its  exorbit- 
ant rates  for  the  loss  of  its  grip  upon  the  public  means  of 
transmitting  intelligence. 

The  relation  of  the  telegraph  to  the  postal  service  can  not  be 
better  described  than  by  quoting  the  following  clear  and  succinct 
statement  of  Postmaster  General  Howe  in  his  report  for  the 
fiscal  year  1882: 

The  business  of  the  telegraph  is  inherently  the  same  as  that  of  the 
mail.  It  is  to  transmit  messages  from  one  person  to  another.  That  is 
the  very  purpose  for  which  post  offices  and  post  roads  are  established. 
The  power  to  establish  is  not  limited  to  any  particular  modes  of  trans- 
mission. The  telegraph  was  not  known  when  the  Constitution  was 
adopted.  Neither  was  the  railway.  I  can  not  doubt  that  the  power  to 
employ  one  is  as  clear  as  to  employ  the  other. 

Numerous  other  Postmasters  General  of  the  United  States 
have  advocated  the  acquisition  of  the  telegraph  and  telephone 
systems  of  the  country. 

What  has  been  said  in  favor  of  government  ownership  and 
operation  of  the  telegraph  applies  with  equal  force  to  the  tele- 
phone service.  As  in  the  case  of  the  telegraph,  this  Government 
might  properly  have  taken  up  and  operated  in  connection  with 
the  postal  service  the  first  telephone  system  of  the  country. 
This  judgment  is  confirmed  by  the  experience  of  the  British 
Government. 

Section  4  of  the  British  telegraph  act  of  1869  provides  that: 

The  Postmaster  General  by  himself  or  his  deputies  and  his  and  their 
respective  servants  and  agents  shall  have  the  exclusive  privilege  of  trans- 
mitting telegrams  within  the  United  Kingdom  of  Great  Britain  and  Ire- 


90  GOVERNMENT   OWNERSHIP    OF 

land,  except  as  hereinafter  provided;  and  shall  also  within  that  Kingdom 
have  the  exclusive  privilege  of  performing  all  the  incidental  services  of 
receiving,  collecting,  or  delivering  telegrams,  except  as  hereinafter  provided. 

In  a  lawsuit  to  determine  the  question  the  highest  courts  of 
Great  Britain  held,  on  December  20,  1880,  that  a  telephone  is  a 
telegraph,  and  a  conversation  by  telephone  is  a  telegram  within 
the  meaning  of  the  telegraph  act,  and  that  the  authority  enabling 
that  country  to  operate  the  telegraph  enabled  it  also  to  operate 
the  telephone. 

The  telegraph  and  telephone  systems  have  long  been  recog- 
nized as  necessary  adjuncts  to  a  complete  postal  service.  As 
with  all  other  privately  controlled  public  utilities,  these  facilities 
have  been  extended  in  our  country  only  in  proportion  as  the 
service  to  be  performed  has  insured  substantial  dividends  for 
the  stockholders.  Under  private  ownership,  therefore,  the  tele- 
graph and  telephone  are  for  the  classes.  Under  Government 
ownership,  through  the  postal  machinery,  which  is  conducted 
in  the  interest  of  the  whole  people  and  already  reaches  every 
man's  door,  the  benefits  of  these  facilities  could  be  extended  to 
the  masses. 

It  is  obvious  that  the  longer  the  acquisition  by  the  Govern- 
ment of  these  facilities  is  deferred  the  greater  will  be  the  cost. 
Moreover,  it  is  economic  waste  to  permit  private  enterprise  to 
build  up  vast  properties  that  must  eventually  be  taken  over  by 
the  Government  in  resuming  its  constitutional  monopoly  at  a 
cost  out  of  all  proportion  to  the  value  of  the  parts  of  such 
properties  that  may  be  utilized  to  advantage  in  the  postal  system. 

The  study  of  this  subject  has  disclosed  that  the  telegraph 
and  telephone  systems  of  the  country  are  so  inextricably  allied 
that  any  consideration  of  the  one  must  necessarily  include  the 
other.  Your  committee  has  therefore  been  under  the  necessity  of 
prosecuting  its  inquiry  beyond  the  province  contemplated  by  your 
order  and  accordingly  its  report  covers  both. 

Telegraph  Service 

According  to  the  best  available  data,  the  telegraph  plant  of 
this  country  in  1912  included  about  247,000  miles  of  pole  line 
carrying  about  1,800,000  miles  of  wire.  The  capitalization  of 
the  land  wires,  segregated,  is  estimated  at  $150,000,000;  including 
the  ocean  wires  and  submarine  cables,  the  capitalization  probably 


TELEGRAPH   AND   TELEPHONE  91 

would  amount  to  $220,000,000.  So  far  as  the  public  generally  is 
concerned,  the  entire  telegraph  service  is  owned  and  operated 
by  two  companies,  their  lines  practically  duplicating  each  other 
in  most  sections  of  the  country. 

Telegraph  facilities  have  not  been  extended  to  the  small 
towns  and  villages  along  with  the  Government  postal  facilities, 
nor  has  the  cost  of  the  service  been  reduced  in  the  inverse  pro- 
portion that  would  seem  to  be  warranted  by  the  increasing  vol- 
ume of  business  transacted.  Neither  has  the  volume  of  business 
in  this  country,  in  proportion  to  the  population,  been  as  great  as 
in  countries  where  this  facility  is  owned  and  operated  govern- 
mentally.  This  fact  unquestionably  is  attributable  to  prohibitive 
rates  and  the  failure  of  the  companies  to  extend  the  service  to 
territory  which  promises  small  profits. 

An  official  report  of  the  Postmaster  General  of  Great  Britain 
in  1911  shows  that  between  1869  (the  year  the  British  Govern- 
ment took  possession  of  the  telegraphs)  and  1900  the  number  of 
messages  handled  in  that  country  increased  thirteenfold,  while 
the  population  increased  but  30  per  cent.  During  the  same  period 
the  population  of  the  United  States  increased  100  per  cent,  and 
yet  the  number  of  telegraph  messages  handled  increased  but 
eightfold. 

In  1912  the  number  of  messages  handled  in  this  country  was 
barely  in  excess  of  one  per  capita;  in  New  Zealand,  where  the 
telegraphs  are  owned  and  operated  by  the  Government,  the 
number  was  more  than  eight  per  capita.. 

Statistics  show  that  although  the  United  States  outranks  all 
other  countries  in  postal  transactions  per  capita,  in  respect  to 
telegraphs  it  is  outranked  by  eight  other  countries. 

All  of  the  important  countries,  the  United  States,  Canada, 
and  Mexico  excepted,  have  bound  themselves  by  an  international 
agreement  to  observe  uniform  regulations  in  the  administration 
of  their  telegraph  service.  These  regulations,  with  a  view  to 
affording  the  people  the  most  efficient  service  at  the  lowest 
cost,  require  the  use  of  the  latest  and  best  improvements  in  the 
telegraphic  art  and  prescribe  the  manner  and  method  of  receiv- 
ing, transmitting,  and  delivering  telegrams  and  the  rates  of  tolls 
to  be  collected.  The  privately  owned  telegraph  companies  of  the 
United  States,  Canada,  and  Mexico,  to  the  detriment  of  the 
people,  have  remained  outsiders  to  these  international  rules  and 
regulations. 


92  GOVERNMENT   OWNERSHIP   OF 

The  United  States  recently  became  a  party  to  an  international 
agreement  with  respect  to  radiotelegraphy,  and  in  this  service 
bound  itself  to  observe  many  of  the  rules  and  regulations  gov- 
erning the  telegraph  service  in  foreign  countries.  On  account 
of  the  close  relation  which  must  exist  between  the  land  telegraph 
companies  and  the  radio  companies  great  confusion  is  now 
resulting  from  the  fact  that  the  United  States  is  bound  to 
observe  modern  rules  and  regulations  in  its  radio  service,  but 
is  compelled  to  use  archaic  forms  and  regulations  in  its  land 
service  because  of  the  attitude  of  the  commercial  telegraph 
companies. 

At  the  International  Radio  Conference  at  London  in  1912 
the  delegates  from  the  United  States  signed  the  treaty  only  with 
the  humiliating  condition  in  the  protocol  that,  as  the  telegraph 
lines  in  the  United  States  were  owned  by  private  companies,  this 
country  must  abstain  from  all  regulations  concerning  tariffs. 

Effect  of  Telephone  on   Telegraph  Service 

The  Postmaster  General  of  Great  Britain  reported  in  June, 
1911,  that  in  1907  the  telegraph  traffic  of  that  country  commenced 
to  show  a  diminution,  owing  to  the  growing  use  of  the  telephone. 
The  like  effect  in  the  United  States  is  shown  by  statistics.  The 
statement  below  shows  the  average  daily  telephone  connections 
of  the  associated  Bell  companies  between  the  years  1900  and 
1910  and  the  annual  number  of  messages  transmitted  by  the 
Western  Union  Telegraph  Co.  during  the  same  period. 

Average  daily  Number  of 

telephone  con-  messages  trans- 

nections  of  the  milted  annually 

associated  Bell  by  the  Western 

telephone  com-  Union   Telegraph 

panies.  Co. 

1900...                                                                   5,817,514  63,167,783 

3905..,                                                                     13,912,551  67,477,320 

1906                                                                       16,940,000  71.847,082 

1S07 18.624,000  74,804,551 

ic.08...                   18,962,397  62,371,287 

1909 20,342,435  68,053,439 

1910 22,294,010  75,135,405 

It  will  thus  be  seen  that  during  the  decade  to  which  the 
foregoing  figures  relate,  while  the  population  of  our  country  was 
increasing  approximately  18  per  cent  (actually  17.8  per  cent),  the 
average  daily  telephone  connections  increased  287  per  cent  and 
the  number  of  telegraph  messages  only  18  per  cent.  The  use  of 


TELEGRAPH  AND   TELEPHONE  93 

the  telephone  in  all  walks  of  life  is  steadily  increasing,  while 
the  use  of  the  telegraph  is  relatively  stationary,  and  therefore 
decreasing. 

(Statistics  showing  the  traffic  of  the  independent  telephone 
companies  and  the  Postal  Telegraph  Co.  are  not  available,  but 
investigation  indicates  that  the  figures  used  above  represent 
fairly  the  relative  importance  of  the  telephones  and  telegra'phs.) 

The  telegraph  companies  have  already  lost  for  the  most  part 
the  short-distance  business  owing  to  the  development  of  the  toll- 
telephone  service,  and  they  probably  will  lose  much  of  the  long- 
distance business  when  the  toll  rates  become  adjusted  on  a  cost 
basis.  Statistics  of  the  telegraph  and  telephone  traffic  in  for- 
eign countries  show  that  the  number  of  long-distance  telephone 
communications  greatly  exceeds  the  number  of  telegrams.  In 
Germany,  for  example,  the  ratio  is  6  to  i.  Certainly  the  general 
trend  in  the  use  of  wire  communication  favors  the  telephone  at 
the  expense  of  the  telegraph. 

This  was  undoubtedly  foreseen  by  the  telegraph  companies 
some  years  ago,  for  it  is  understood  that  before  the  acquisition 
of  the  Western  Union  Co.  by  the  American  Telegraph  &  Tele- 
phone Co.  the  former  contemplated  improvements  in  its  system 
whereby  the  telephone  would  be  added  to  the  telegraph  service, 
and  this  attitude  on  the  part  of  the  Western  Union  Co.  was  an 
underlying  reason  why  its  property  was  acquired  by  the  Bell 
interests. 

Telephone  circuits  generally  consist  of  two  wires,  known  as 
metallic  circuits.  It  is  a  simple  and  inexpensive  operation  to 
superimpose  the  telegraph  feature  on  each  wire.  On  the  other 
hand,  the  telegraph  circuit  in  this  country  is  commonly  a  single 
wire  with  earth  return.  A  large  percentage  of  this  is  iron  wire, 
which  can  not  be  used  satisfactorily  for  long-distance  telephone 
purposes.  Therefore,  to  add  the  telephone  feature  to  such  a 
circuit  would  necessitate  not  only  the  duplication  of  the  entire 
wire  equipment  in  order  to  provide  the  required  metallic  circuits, 
but  the  substitution  of  copper  wherever  iron  wire  is  used.  It  will 
thus  be  seen  that  although  it  is  practicable  and  economical  to 
superimpose  the  telegraph  feature  on  existing  telephone  circuits, 
the  cost  would  be  prohibitive  to  do  the  reverse. 

On  many  of  the  long-distance  telephone  lines  owned  by  the 
American  Telegraph  &  Telephone  Co.  the  telegraph  feature  has 


94  GOVERNMENT   OWNERSHIP    OF 

been  superimposed  and  the  same  wires  are  to-day  carrying  both 
telegraph  and  telephone  communications  simultaneously. 

Telegraph  Systems  Inadequate  for  Postal  Needs 

The  acquisition  of  the  telegraph  service  of  the  country  would 
necessitate  taking  over  the  duplicate  plants  of  the  two  companies 
controlling  this  service  with  their  duplicate  expenses  of  main- 
tenance. Unquestionably  one  could  be  made  to  serve  the  same 
territory.  Furthermore,  and  of  great  importance,  is  the  fact  that 
even  the  entire  plants  of  these  two  companies  would  be  inade- 
quate for  the  purpose  of  the  Government,  because  their  facilities 
have  been  extended  only  to  profitable  territory.  Should  the  Gov- 
ernment resume  control  and  operate  this  service,  it  would  be  with 
the  object  of  extending  the  facilities  in  the  interest  of  the  people 
and  hence  regardless  of  profit. 

Assuming  that  the  poles  of  the  present  telegraph  systems 
would  sustain  the  increased  number  of  wires  necessary  to  super- 
impose the  telephone  feature,  the  expense  of  constructing, 
equipping  throughout  with  copper  wire,  loading  the  same,  and 
providing  the  extra  circuits  required  could  not  be  estimated  at 
less  than  $75,000,000.  Add  this  to  the  estimated  value  of  the 
telegraphic  land  lines  ($150,000,000)  and  it  will  be  seen  that  the 
cost  would  be  equal  to  $225,000,000,  or  $25,000,000  in  excess  of 
the  estimated  value  of  the  interurban  and  long-distance  tele- 
phone network.  The  expense  of  equipping  the  latter  system  for 
telegraphy  would  involve  only  the  cost  of  the  instruments,  and 
would  therefore  be  negligible. 

In  view  of  the  foregoing  it  is  the  opinion  of  your  com- 
mittee that  it  would  be  unwise  from  a  commercial  standpoint 
for  the  Government  to  acquire  the  telegraph  systems  of  the 
country. 

Telephone  Service 

The  Scientific  American  Reference  Book  for  1913  contains 
statistics  showing  that  in  1912  there  were  about  18,179,000  miles 
of  telephone  wire  in  operation  in  this  country,  serving  8,362,000 
telephones.  About  2,800,000  miles  of  this  were  interurban  and 
long-distance  wires  and  the  remainder,  about  15,400,000  miles, 
served  the  city  and  town  exchanges.  Over  70  per  cent  of  this 
entire  mileage  is  controlled  through  stock-majority  ownerships 


TELEGRAPH   AND   TELEPHONE  95 

by  an  association  known  as  the  American  Telephone  &  Tele- 
graph Co.  These  (Bell)  lines  constitute  about  12,421,000  miles 
of  exchange  wires  and  about  2,189,000  miles  of  toll  wires.  More 
than  half  of  this  system  is  underground. 

Mr.  Theodore  N.  Vail,  president  alike  of  the  Western  Union 
Telegraph  Co.  and  the  associated  Bell  telephone  companies,  in 
his  announcement  of  policy  states : 

There  is  a  road  to  every  man's  door;  there  should  be  a  telephone  to 
every  man's  house.  .  .  .  Under  common  control  ...  it  must  be 
sufficiently  strong  to  constitute  practically  one  system,  intercommunicating, 
interdependent,  universal. 

This  statement  is  merely  a  concurrence  in  the  accepted  eco- 
nomic doctrine  of  the  monopolistic  tendency  of  the  telephone 
business.  The  history  of  this  business  clearly  establishes  the 
futility  of  competition  as  a  means  of  regulating  its  conduct  in 
the  interest  of  the  people.  Mr.  Vail,  therefore,  naively  agrees 
to  the  preamble  of  the  economist  and  fails  to  follow  the  line  of 
thought  to  its  inevitable  conclusion.  The  division  of  opinion 
between  him  and  practically  all  of  the  economists  who  have 
given  this  subject  their  attention  is  upon  the  question  whether 
the  monopoly  should  be  public  or  private.  The  decision  of  this 
question  must  rest  upon  which  is  better  for  the  public  welfare. 

There  is  a  radical  difference  between  the  policies  of  a  public 
and  a  private  monopoly,  both  as  regards  the  extension  of  service 
and  the  fixing  of  rates.  In  the  extension  of  service  the  deter- 
mining factor  with  the  Government  is  the  needs  of  the  people ; 
with  the  private  monopoly,  the  consideration  of  profit.  The 
effect  of  the  application  of  these  two  policies  to  similar  public 
utilities  is  shown  by  comparison  between  the  present  universal 
extension  of  the  mail  facilities  and  the  limited  extension  of  the 
telegraph  and  telephone  facilities.  The  private  monopoly  has  no 
incentive  to  extend  its  facilities  to  unprofitable  territory,  but  the 
Government  must  serve  all  the  people.  This  universal  service  is 
accomplished  by  the  equalization  of  rates.  In  fixing  rates,  the 
policy  of  this  Government  is  to  superimpose  no  charge  for  tax- 
ation, but  only  to  see  to  it  that  the  service  as  a  whole  is  self- 
supporting.  The  private  monopoly,  on  the  other  hand,  must 
make  a  profit,  and  in  providing  for  this  tends  to  increase  its 
rates  to  the  highest  point  that  will  not,  by  so  greatly  restricting 
the  volume  of  business,  impair  the  aggregate  profit.  The  effect 


96  GOVERNMENT   OWNERSHIP   OF 

of  the  policy  of  private  monopoly  is  aptly  described  by  Prof. 
Holcombe  in  his  Public  Ownership  of  Telephones  on  the  Con- 
tinent of  Europe.  He  states  : 

The  forces  of  demand  and  supply  will  operate  under  a  regime  of 
monopoly,  as  under  one  of  free  competition,  but  the  results  will  not  be 
the  same.  In  the  latter  case  the  interests  of  the  monopolist  will  ordinarily 
lead  him  to  fix  his  rates  at  a  level  which  is  intended  to  yield  him  the 
maximum  of  profit.  Having  adopted  a  tentative  schedule  of  rates,  he 
carefully  observes  the  extent  of  the  demand  for  his  services  at  those  rates 
and  readjusts  them,  if  need  be,  until  the  actual  sale  of  his  services  verifies 
his  calculations.  His  purpose  always  is  to  make  as  large  as  possible  the 
surplus  that  remains  after  deducting  from  his  gross  receipts  all  the 
expenses  of  rendering  the  service.  Consequently,  under  a  regime  of  un- 
regulated private  monopoly,  rates  are  certain  to  be  exorbitant.' 

In  the  telephone  business,  to  this  disadvantage  from  the  viewpoint  of 
the  community  of  monopolies  in  general,  must  be  added  further  special 
disadvantage.  Not  only  is  there  no  protection  against  exorbitant  rates,  but 
also  there  is  no  security  that  the  distribution  of  the  total  charges  between 
the  different  classes  of  telephone  users  will  be  made  on  a  basis  calculated 
to  promote  the  widest  utility  of  the  service,  such  as  it  is.  For  the  criterion 
of  a  sound  monopolistic  rate  policy  is  not  the  greatest  utility  of  the  service, 
but  the  greatest  profit  of  the  monopolist.  Unfortunately,  the  two  do  not 
coincide.  There  will,  for  example,  be  no  incentive  to  extend  the  service  to 
wider  circles  of  users,  unless  such  an  extension  will  increase  the  gross 
receipts  more  than  it  will  increase  the  operating  expenses.  The  enhanced 
profits,  therefore,  which  the  monopolist  will  obtain  from  those  users  whose 
demand  for  the  service  is  least  elastic  will  not  be  put  into  extensions  for 
the  benefit  of  those  whose  demand  is  more  elastic,  and  to  whom,  con- 
sequently, a  small  reduction  in  price  would  mean  a  great  increase  in  satis- 
faction. Monopoly  rates  will  not  enable  the  community  at  large  to  derive 
from  the  telephone  service  the  maximum  of  satisfaction.  Therefore  they 
are  not  reasonable  rates. 

The  Bell  companies,  under  the  guidance  of  the  American 
Telephone  &  Telegraph  Co.,  whose  president  has  been  quoted, 
are  working  assiduously  toward  their  admitted  object — a  nation- 
wide monopoly  of  the  telephone  business.  This  company  avails 
itself  of  every  means  of  stressing  the  desirability  of  having  this 
immense  project  under  the  control  of  one  organization,  and  the 
necessity  for  uniform  equipment,  uniform  engineering,  and  uni- 
form operating  practices  is  scrupulously  observed.  Only  one 
make  of  equipment  is  authorized  for  use  on  all  of  these  Bell 
lines — that  manufactured  by  the  Western  Electric  Co.,  one  of 
the  Bell  properties. 

In  extending  their  system  the  Bell  companies  have  refused 
to  connect  with  other  companies  on  the  ground  that  this  would 


TELEGRAPH   AND   TELEPHONE  97 

incorporate  into  their  service  telephones,  switchboards,  wires, 
and  other  apparatus  not  in  uniformity  with  those  used  by  them 
and  that  such  dissimilarity  of  equipment  would  result  in  poor 
service.  They  have  likewise  refused  to  make  such  connections 
on  the  ground  that  one  central  organization  must  have  control 
over  the  entire  system.  This  attitude  on  the  part  of  the  Bell 
system  has  deterred  the  development  of  independent  systems 
and  has  seriously  crippled  those  which  have  been  started. 

Unquestionably,  from  the  engineering  viewpoint  the  attitude 
of  the  Bell  companies  is  proper,  for  it  is  very  necessary  in  the 
interest  of  the  most  efficient  service  that  the  entire  telephone 
network  be  under  one  management.  In  the  interest  of  the  people, 
however,  it  is  highly  desirable  that  this  management  be  vested 
in  an  unselfish  agency  like  the  Postal  Service,  where  the  policy 
would  be  universal  extension  at  cost  rather  than  limited  exten- 
sion at  the  maximum  of  profit. 

It  is  needless  here  to  enter  into  the  manifold  advantages  and 
benefits  that  would  accrue  to  the  people  from  a  universal  tele- 
phone service.  The  telephone  has  now  become  an  indispensable 
aid  to  business  and  a  means  of  social  intercourse  to  which  all 
classes  properly  aspire.  As  it  has  done  with  the  mails,  it  is  the 
duty  of  the  Government  to  make  this  facility  available  to  all  of 
its  citizens  without  discrimination. 

There  is  only  one  alternative :  The  enforcement  in  accordance 
with  law  of  a  condition  of  competition  in  the  telephone  and  tele- 
graph business.  Without  considering  whether  this  could  be  done 
effectually  in  the  case  of  an  enterprise  inherently  so  monopolistic, 
it  is  sufficient  to  note  that  while  the  execution  of  such  a  plan 
would  be  fraught  with  difficulty,  its  effect  would  not  be  to  im- 
prove service  and  reduce  rates,  but  the  reverse.  Competition  ap- 
plied to  this  public  utility  has  clearly  been  shown  to  result  in 
waste  and  inefficiency  due  to  duplication.  Not  artificial  restraint, 
but  natural  development  under  Government  control  is  the  true 
policy  for  the  public  interest. 

Maps  showing  the  routes  and  stations  of  the  telephone  systems 
and  those  of  the  Postal  Service  in  this  country  are  strikingly  sim- 
ilar, except  as  regards  extent.  Hence,  in  the  profitable  territory 
we  have  three  agencies — the  mail,  the  telegraph,  and  the  telephone 
— engaged  in  the  business  of  transmitting  intelligence,  and  differ- 
ing only  in  the  modes  of  transmission. 


98  GOVERNMENT    OWNERSHIP    OF 

The  Postal  Service  maintains  about  64,000  offices  and  stations 
and  employs  about  290,000  persons.  The  telephone  service  main- 
tains about  5O>OO°  offices  and  employs  about  200,000  persons. 
Were  these  two  services  merged  and  operated  under  govern- 
ment control  it  would  be  feasible  to  transfer  a  large  number  of 
the  telephone  offices  to  post  office  buildings,  and  thus  greatly  re- 
duce the  aggregate  expense  for  quarters.  Furthermore,  as  the 
majority  of  the  telephone  employees  are  operators  who  require 
no  special  technical  training,  the  merging  of  the  two  forces  would 
result  in  a  material  reduction  in  the  total  number  of  employees 
required.  Furthermore,  it  is  understood  that  the  automatic  and 
semi-automatic  equipment  is  rapidly  approaching  perfection,  and 
should  this  be  accomplished  the  adoption  of  such  equipment  would 
bring  about  a  still  further  reduction  in  force. 

Your  committee  has  no  doubt  that  the  institutional  efficiency 
of  the  telegraph  and  telephone  services  in  this  country  would 
be  increased  by  government  ownership.  The  statistics  in  the 
appendixes  hereto  show  that  in  the  United  States  compared 
with  other  countries  the  number  of  telephone  calls  per  employee 
is  relatively  low,  while  the  number  of  mail  pieces  per  employee 
is  relatively  high. 

The  magnitude  of  the  telephone  service  has  led  your  com- 
mittee to  consider  the  feasibility  of  gradually  acquiring- the  net- 
work of  the  country  in  segments,  leaving  the  remainder  to  be 
operated  commercially  under  licenses  issued  by  the  Postmaster 
General.  For  this  purpose  the  property  has  been  divided  into 
three  groups,  as  follows: 

(A)  Long-distance  and  toll  lines. 

(B)  Exchange  systems. 

(C)  Farmer  lines.    , 

(A)  Long -Distance  and  Toll  Lines 

The  long-distance  lines  of  the  country  are  those  which  form 
the  connection,  between  important  cities.  They  are  owned  and 
operated  by  the  American  Telegraph  &  Telephone  Co.  inde- 
pendently of  the  associated  Bell  companies.  The  failure  of  the 
independent  companies  to  secure  connection  with  these  lines  has 
been  the  principal  reason  for  their  inability  to  successfully  com- 
pete with  the  Bell  companies.  This  long-distance  service  was 
formerly  kept  quite  separate  and  distinct  in  some  places  from  the 


TELEGRAPH   AND   TELEPHONE  99 

service  of  the  associated  Bell  companies,  but  today  the  wires 
usually  terminate  in  a  separate  panel  on  a  main  switchboard  in 
the  Bell  offices. 

Few  engineering  difficulties  would  be  encountered  in  the 
acquisition  and  operation  of  the  long-distance  lines  as  a  separate 
system.  They  are  in  excellent  condition  and  are  maintained  and 
operated  by  skilled  employees,  some 'of  whom  it  might  be  ad- 
visable for  the  Government  to  retain,  at  least  until  the  con- 
solidation of  the  post  and  telephone  offices  would  permit  the 
Postmaster  General  to  make  changes  and  adjustments  in  the 
personnel. 

The  acquisition  of  only  the  long-distance  lines  would  necessi- 
tate immediate  expenditures  on  the  part  of  the  Government  to 
transfer  their  terminals  from  the  Bell  offices  to  the  post  offices. 
In  cities  where  the  local  commercial  telephone  companies  own 
the  underground  conduits  it  would  be  practicable  and  economi- 
cal for  the  Government  to  lease  sufficient  pairs  of  wires  from  the 
local  companies  to  lead  the  long-distance  lines  to  the  post  office 
switchboards.  The  local  commercial  telephone  companies  would 
run  wires  from  their  own  exchanges  to  the  government  board 
and  thus  secure  their  outlet  to  neighboring  cities. 

The  toll  lines  are  those  centering  in  city  exchanges  and 
running  therefrom  to  near-by  towns  and  villages,  to  distant 
suburbs  of  the  cities,  and  to  factories  or  even  residences  some 
distance  outside  of  the  local  exchange  limits.  These  lines  are 
connected  with  a  separate  section  of  the  exchange  switchboard. 
Their  acquisition  by  the  Government  would  be  of  great  value 
in  increasing  the  efficiency  of  the  long-distance  system.  No  un- 
usual engineering  difficulties  would  be  presented  in  separating 
these  lines  from  the  commercial  exchange  plant,  although  they  are 
more  closely  related  to  city  exchanges  than  are  the  long-distance 
lines. 

In  some  instances  it  might  be  difficult  to  distinguish  between 
a  certain  toll  line  in  the  strict  sense  of  the  term  and  a  part  of  the 
city  exchange  system.  Therefore,  it  would  be  well  to  designate 
as  "interurban"  all  long-distance  and  toll  lines,  as  is  done  abroad, 
and  include  in  this  class  only  such  lines  as  really  connect  cities, 
towns,  or  distant  communities.  This  would  clearly  define  the 
scope  of  the  transfer  in  the  acquisition  by  the  Government  of  all 
interurbans. 


ioo  GOVERNMENT   OWNERSHIP    OF 

No  trouble  should  be  experienced  in  the  villages  and  small 
towns  in  transferring  the  toll  lines  to  the  Government  because 
'the  toll  telephone  is  usually  the  only  one  in  the  village  and  the 
transfer  would  simply  involve  the  removal  of  the  instrument 
and  wire  from  the  general  store  to  the  post  office. 

In  the  community  where  a  struggling  little  exchange  is  main- 
tained, serving  a  few  telephones  in  town  and  a  few  on  near-by 
farms,  the  separation  of  the  toll  lines  from  the  existing  system 
would  make  the  town  exchange  unprofitable  and,  therefore,  the 
owners  would  desire  to  turn  it  also  over  to  the  Government. 
Provision  should  be  made  for  the  acquisition  in  such  cases  of 
these  small  exchanges.  If  the  exchanges  were  not  taken  over  it 
would  be  necessary  to  install  switchboards  in  the  post  offices  and 
lead  the  interurban  wires  thereto  on  poles.  These  small  switch- 
boards are  simple  and  no  great  technical  knowledge  is  required 
to  operate  them.  The  operator  might  perform  other  duties  ac- 
cording to  the  number  of  calls  per  day.  The  lineman  or  in- 
spector would  keep  the  lines  and  equipment  in  working  order  and 
a  post  office  employee  could  be  easily  taught  to  manipulate  the 
board. 

In  cities  where  commercial  companies  are  maintaining  re- 
munerative exchanges  which  involve  a  large  number  of  instru- 
ments, cooperative  relations  would  have  to  be  maintained  be- 
tween the  Government  and  the  city  exchanges.  In  such  cities 
the  toll  lines,  like  the  long-distance  lines,  would  be  connected 
with  the  post  office  switchboards.  This  may  or  may  not  involve 
underground  conduits,  according  to  the  municipal  regulations. 

The  superimposing  of  the  telegraph  feature  on  the  telephone 
service  (both  long-distance  and  toll)  might  be  gradually  brought 
about  at  small  cost.  The  long-distance  lines  of  the  American 
Telephone  &  Telegraph  Co.  can  be,  and  in  some  instances  actu- 
ally are,  used  for  telegraphy  simultaneously  with  telephony. 
There  is  no  reason  why  the  toll  lines  should  not  be  utilized  in  the 
same  way.  The  addition  of  the  telegraph  feature  to  the  inter- 
urban  telephone  system  of  the  country  would  much  more  than 
duplicate  existing  commercial  telegraph  systems. 

(B)  Exchange  Systems 

The  exchange  systems  are  those  which  render  exclusively 
local  service.  In  the  event  it  is  deemed  unwise  to  take  over  the 


TELEGRAPH   AND   TSLEPiiCN-E  leu 

telephonic  network  in  its  entirety,  it  is  the  opinion  of  your  com- 
mittee that  the  exchange  systems  should  not  be  acquired  until 
after  the  acquisition  of  the  interurban  lines.  Meanwhile  they 
should  be  permitted  to  operate  under  licenses  issued  by  the 
Postmaster  General. 

(C)  Farmer  Lines 

Farmer  lines  are  certain  independent  lines  built  in  rural  com- 
munities by  private  organizations,  mutual  associations  of  farm- 
ers, or  by  individuals  for  the  purpose  of  connecting  the  farms 
with  the  nearest  town  or  village.  These  lines  involve  about 
600,000  miles  of  wire  and  are  owned  by  about  19,000  different 
organizations,  associations,  or  individuals.  Generally  they  are 
not  well  built  or  efficiently  maintained.  In  some  localities  the 
Bell  companies  have  encouraged  farmers  to  build  these  lines 
themselves,  permitting  them  to  string  the  wires  on  poles,  trees, 
fence  posts,  etc.,  and  furnishing  them  with  connections  with  Bell 
switchboards  and  toll  lines  under  the  condition  that  they  pur- 
chase Western  Electric  equipment.  The  desirability  of  the  Gov- 
ernment's acquiring  these  lines  in  their  present  condition  is  seri- 
ously questioned.  It  is  believed  that  it  would  be  preferable  to 
license  them  under  regulations  prescribed  by  the  Postmaster 
General. 

If  it  be  deemed  wise  for  the  Government  to  take  over  at  the 
outset  only  a  part  of  the  telephone  structure,  this  should  be  done 
with  the  fixed  policy  and  expressed  intention  of  eventually 
acquiring  the  whole  commercial  network. 

There  are  two  clear  and  sufficient  reasons,  both  from  the  view- 
point of  expediency  and  desirability,  for  acquiring  the  complete 
network  at  the  outset.  Universal  extension  of  service  and 
equitable  adjustment  of  rates  can  be  attained  only  when  the 
entire  service  is  under  one  management. 

i.  A  movement  toward  the  acquisition  of  only  a  part  of  the 
plant — the  toll  lines,  for  example — would  meet  with  all  the  op- 
position the  Bell  companies  could  bring  forth,  and  it  would  be 
supported  by  the  strongest  possible  arguments— the  engineering 
and  economic  principles  referred  to.  The  toll  lines  and  the  ex- 
change service  are  so  intimately  associated  that  in  many  places 
the  same  employees  serve  both.  To  separate  these  services  would 

10 


102  GOVERNMENT   OWNERSHIP    OF 

be  uneconomical.  Furthermore,  the  separation  of  the  toll  and 
long-distance  lines  from  the  exchange  service  would  entail  an 
immediate  expenditure  for  new  switchboards,  cables,  poles,  etc. 
2.  The  operation  of  only  a  part  of  the  plant  is  fraught  with 
the  obstacles  encountered  by  the  British  Government  when  it 
endeavored  to  do  this.  The  private  companies,  realizing  that  it 
would  be  only  a  question  of  time  when  the  entire  plant  would 
become  Government  property,  would  assume  an  apathetic  atti- 
tude and  allow  their  plants  to  run  down  and  become  inefficient. 
Or  they  might  assume  a  hostile  attitude  and  use  every  possible 
means  of  preventing  the  efficient  conduct  of  the  service  in  order 
to  discredit  the  postal  management.  This  attitude  could  well  be 
assumed  even  while  operating  under  licenses  issued  by  the  Post- 
master General. 

Cost  and  Payment 

According  to  the  best  available  data  the  capitalization  of  the 
long-distance  and  toll  lines  represents  approximately  $200,000,000 
and  the  capitalization  of  the  entire  commercial  network  (ex- 
change service,  toll,  and  long-distance  lines)  approximately 
$900,000,000.  The  cost  to  the  Government  would  be  less  than  the 
appraised  value,  since  it  would  be  undesirable  for  the  Govern- 
ment to  purchase  the  real-estate  holdings  of  the  telephone  com- 
panies, such  as  exchange  and  office  buildings,  etc.  Sufficient 
space  in  these  buildings  for  the  exchanges  could  be  leased  until 
accommodations  could  be  provided  in  the  post  offices  and  stations. 

While  it  would  be  necessary  to  acquire  title  and  possession 
of  the  network  by  a  single  process  of  statutory  appropriation, 
and  on  the  same  day,  it  by  no  means  follows  that  payment  for 
the  properties  would  or  could  be  made  in  the  same  total  or  single 
manner.  There  are  altogether  some  three  thousand  companies 
or  distinct  legal  proprietorships  of  the  telephone  service.  Even 
the  Bell  companies,  whose  holdings  comprise  approximately 
three-fourths  of  the  entire  network  of  the  country,  number  more 
than  200.  Therefore,  as  many  distinct  payments  would  be  made 
as  there  are  different  proprietorships.  Moreover,  these  payments 
would  extend  over  a  sufficient  period  in  which  to  make  the  ap- 
praisals and  enable  the  courts  to  adjust  such  legal  questions  as 
may  arise.  The  payments  would  be  distributed  throughout  a  pe- 


TELEGRAPH   AND   TELEPHONE  103 

riod  of  several  years,  and  thus  ample  time  and  opportunity  to 
market  the  bonds  would  seem  to  be  assured. 

It  is  not  believed  that  any  serious  difficulty  would  be  en- 
countered in  financing  the  proposition,  as  the  extinction  of  the 
securities  of  the  superseded  companies  by  Government  acquisition 
would  be  likely  to  create  a  demand  for  an  equal  amount  of  other 
securities,  and  it  would  be  but  natural  that  a  large  amount  of  the 
bonds  issued  from  time  to  time  by  the  Government  would  be 
purchased  by  the  former  holders  of  telephone  securities.  In 
this  connection  attention  is  directed  to  the  financing  of  the  United 
States  Steel  Co.,  the  Panama  Canal,  and  the  acquisition  of  rail- 
ways by  Japan  and  by  Switzerland. 

The  data  assembled  by  the  committee  in  the  course  of  its 
investigation,  which  constituted  the  basis  of  its  study  and  con- 
clusions, are  set  forth  in  Appendixes  A  to  H,  inclusive,  that  ac- 
company and  are  hereby  made  a  part  of  this  report. 

Recommendations 

Your  committee  has  reached  the  conclusion  that  the  only 
way  to  afford  to  the  people  the  complete  and  modern  postal  facil- 
ities that  the  Constitution  makes  it  the  duty  of  the  Government 
to  provide  is  to  put  into  effect  the  following  recommendations : 

1.  That  Congress  declare  a  Government  monopoly  over  all 
telegraph,  telephone,   and  radio  communication  and  such  other 
means   for  the   transmission   of   intelligence   as   may   hereafter 
develop. 

2.  That  Congress  acquire  by  purchase  at  this   time  at  ap- 
praised   value    the    commercial    telephone    network,    except    the 
farmer  lines. 

3.  That  Congress  authorize  the  Postmaster  General  to  issue, 
in  his  discretion  and  under  such  regulations  as  he  may  prescribe, 
revocable  licenses  for  the  operation,  by  private  individuals,  as- 
sociations, companies,  and  corporations,  of  the  telegraph  service 
and  such  parts  of  the  telephone  service  as  may  not  be  acquired 
by  the  Government. 

Respectfully  submitted. 

DANIEL  C.  ROPER, 
M.  O.  CHANCE, 
J.   C.   KOONS, 

Committee. 


104  GOVERNMENT   OWNERSHIP    OF 

[Abridged    from   Appendix   A.] 

The  electrical  discoveries  and  inventions  of  Morse  and  others 
were  first  practically  applied  to  the  transmission  of  intelligence 
by  the  Government.  On  March  3,  1843,  Congress  appropriated 
$30,000  to  test  the  practicability  of  the  electromagnetic  telegraph. 
A  line  was  stretched  under  the  direction  of  Prof.  Morse  between 
Washington  and  Baltimore,  and  on  May  24,  1844,  communication 
was  opened.  Three  days  later  the  proceedings  of  the  Democratic 
convention,  sitting  at  Baltimore,  was  reported  in  Washington  by 
means  of  an  instrument  installed  in  the  east  end  of  the  Capitol. 

The  postal  nature  of  the  telegraph  was  from  the  beginning 
clearly  apprehended.  In  the  appropriation  act  of  August  10, 
1846,  it  is  provided  that  "the  proceeds  of  the  telegraph  between 
Washington  city  and  Baltimore  be,  and  the  same  are  hereby, 
directed  to  be  placed  in  the  Treasury  of  the  United  States  for 
the  benefit  of  the  Post  Office  Department  in  the  same  manner  as 
other  revenues  from  postage." 

Henry  Clay  advocated  Government  ownership  of  the  tele- 
graph in  1844,  saying :  "It  is  quite  manifest  it  is  destined  to  exert 
great  influence  on  the  business  affairs  of  society.  In  the  hands 
of  private  individuals  they  will  be  able  to  monopolize  intelligence 
and  perform  the  greatest  operations  in  commerce  and  other  de- 
partments of  business.  I  think  such  an  engine  should  be  ex- 
clusively under  the  control  of  the  Government." 

Postmaster  General,  Hon.  Cave  Johnson,  in  his  annual  report 
for  the  fiscal  year  1845  urged  that  the  control  of  so  valuable  an 
agency  for  the  diffusion  of  intelligence  should  be  left  in  the  hands 
of  the  Government,  where  its  operation  would  be  conducted  for 
the  benefit  of  the  public.  Unfortunately,  he  was  unable  to  foresee 
that  such  operation  would  ever  become  a  source  of  revenue 
rather  than  of  expense,  and  his  pessimism  regarding  the  finan- 
cial phase  of  the  telegraphic  service  undoubtedly  had  much  to  do 
with  defeating  the  very  recommendation  that  he  urged  on  the 
ground  of  public  policy. 

Prof.  Morse  himself  was  impressed  by  the  propriety  of  gov- 
ernment ownership  of  his  invention  and  offered  his  patent  to  the 
Government  for  $100,000,  saying  that  it  was  "an  engine  for  good 
or  evil,  which  all  opinions  seem  to  concur  in  desiring  to  have 
subject  to  the  control  of  the  Government,  rather  than  have  it  in 


TELEGRAPH   AND   TELEPHONE  105 

the  hands  of  private  individuals  or  associations."  It  is  to  be 
regretted  that  this  proposal  did  not  receive  favorable  considera- 
tion at  the  hands  of  Congress,  but  his  own  right  to  the  exclusive 
telegraph  idea  was  disputed  by  other  inventors  and  was  to  be 
the  subject  of  protracted  litigation,  so  that  the  purchase  of  his 
patent  did  not  present  to  Congress  the  clear-cut  alternative  that 
was  to  be  desired  in  expending  a  large  amount  of  Government 
funds  for  an  intangible  idea  the  value  of  which  was  at  that  time 
problematical. 

Congress  Authorizes  Sale-  of  Government  Telegraph:  1846 

The  telegraph  service  between  Washington  and  Baltimore 
was  not  self-supporting,  and  appropriations  for  its  maintenance 
were  made  but  grudgingly  by  Congress.  Every  attempt  to  secure 
legislation  authorizing  the  building  of  additional  lines  failed. 

In  his  report  for  the  fiscal  year  ended  June  30,  1846,  Post- 
master General  Johnson  reiterated  his  contention  for  a  govern- 
ment-owned telegraph. 

Nothing  came  of  all  these  recommendations,  however,  and 
on  March  4,  1847,  the  Postmaster  General,  confronted  by  a  de- 
pressing condition  of  the  postal  finances  and  despairing  of  legis- 
lative support  in  prosecuting  the  enterprise  as  a  part  of  the 
Postal  Service,  effected  the  sale  of  the  Government  line. 

This  was  the  period  of  the  Mexican  War  and  of  intense  po- 
litical rivalry  and  sectional  controversy.  It  was  also  a  period 
of  unparalleled  expansion.  In  the  midst  of  a  host  of  seemingly 
greater  issues  Congress  neglected  the  telegraph. 

But  if  the  Government  was  slow  to  enter  into  the  new  enter- 
prise, promoters  and  speculators  eagerly  seized  upon  the  oppor- 
tunity and  organized  companies  for  the  extension  of  telegraphic 
communication.  Questionable  financial  methods  and  unsubstan- 
tial building  were  characteristic  of  many  of  these  companies,  their 
object  being  rather  to  sell  stock  than  to  perform  any  real  service 
to  the  public. 

By  1866  these  early  "wildcat"  concerns  had  been  absorbed 
by  the  Western  Union  Telegraph  Co.,  and  an  object  lesson  of 
the  monopolistic  tendency  of  the  business  was  clearly  presented. 
In  that  year  Congress  enacted  the  legislation  in  regard  to  the 
telegraph  that  is  still  in  force. 


io6  GOVERNMENT   OWNERSHIP    OF 

Report  of  Postmaster  General  Randall:   1867 

Postmaster  General  Randall,  in  his  report  for  the  fiscal  year 
ended  June  30,  1867,  referred  to  the  fact  that  the  subject  of  con- 
necting the  telegraphic  system  of  the  country  with  the  Postal 
Service  had  attracted  public  attention,  and  that  it  had  recently 
transpired  that  the  telegraphic  system  of  Great  Britain  had  been 
put  in  charge  of  the  British  Post  Office  Department.  [He 
stated]  that  it  was  a  matter  of  very  great  importance  which 
ought  to  be  thoroughly  investigated  by  Congress. 

Reports  of  Postmaster  'General  Creswell:   1869  and  1871 

In  his  report  for  the  fiscal  year  1869  Postmaster  General 
Creswell  stated  that  he  should  defer  making  any  recommenda- 
tion concerning  it  until  a  greater  degree  of  efficiency  could  be 
attained  in  the  Postal  Service  as  then  constituted. 

Mr.  Creswell  again  refers  to  the  subject  in  his  report  for  the 
fiscal  year  ended  June  30,  1871,  and  after  discussing  the  regula- 
tion and  control  or  the  ownership  and  management  of  telegraph 
systems  in  foreign  countries,  particularly  in  Great  Britain,  which 
became  effective  February  5,  1870,  he  makes  the  following 
comment : 

These  facts,  all  tending  with  overwhelming  force  in  one  direction, 
demonstrate  conclusively  the  utility  of  the  postal  telegraph  for  both  Gov- 
ernment and  people. 

In  transmitting  to  Congress  this  report  of  the  Postmaster 
General,  President  Grant  wrote: 

The  suggestions  of  the  Postmaster  General  for  improvements  in  the 
department  presided  over  by  him  are  earnestly  recommended  to  your 
special  attention;  especially  do  I  recommend  favorable  consideration  of 
the  plan  for  uniting  the  telegraphic  system  of  the  United  States  with  the 
postal  system. 

"Washburn"  and  "Hubbard"  Plans  Before  Congress:  1871-2 

In  the  meantime  the  5-year  period  stipulated  in  the  act  of  1866 
had  expired  and  two  distinct  propositions  were  being  urged  in 
Congress.  The  first  of  these,  indorsed  by  the  President  and 
the  Postmaster  General,  was  originated  by  Hon.  C.  C.  Wash- 
burn,  of  Wisconsin,  and  was  twice  submitted  by  him  in  the  form 
of  a  bill.  Mr.  Washburn's  plan  contemplated  that  the  Govern- 


TELEGRAPH   AND   TELEPHONE  107 

ment  should  take  possession  and  own  the  entire  telegraph  system 
of  the  country  and  operate  it  as  part  of  the  postal  system. 

The  second  proposition  was  known  as  the  "Hubbard"  plan, 
from  its  having  been  originated  by  Gardiner  G.  Hubbard,  of 
Boston.  The  plan  proposed  the  incorporation  of  a  private  com- 
pany to  which  should  be  granted  special  privileges  by  the  Gov- 
ernment, in  return  for  which  it  should  contract  with  the  Post 
Office  Department  for  the  transaction  of  the  telegraphic  business 
of  the  country  at  certain  specified  rates. 

In  the  report  of  Postmaster  General  Creswell  for  the  year 
1872  he  deals  at  length  with  the  subject  of  a  Government  tele- 
graph. 

After  comment  on  the  rivalry  of  the  telegraph  with  the  mail, 
the  defects  and  abuses  of  the  telegraph  under  corporate  man- 
agement and  oppressive  tariffs,  the  report  then  refers  to  certain 
abuses  of  the  system,  such  as  the  improper  use  of  telegraphic 
information,  free  messages,  favoritism  to  customers,  and  the 
oppressive  influence  of  telegraph  companies  upon  newspapers. 

Report  of  Postmaster  General  Creswell:  1873 

Postmaster  General  Creswell,  in  his  report  for  the  year  1873, 
again  reiterates  his  views  on  a  postal  telegraph. 

The  matter  of  Government  control  of  the  telegraph  system 
of  the  country  does  not  appear  to  have  been  again  discussed  in 
reports  of  the  department  until  the  report  of  Postmaster  Gen- 
eral Maynard  for  the  year  1880.  He  refers  to  a  visit  to  the 
British  post  office  and  to  the  success  of  the  operation  of  the 
telegraph  system  by  the  postal  service  of  that  country,  and 
inquires — 

Is  it  not  time  for  us  to  renew  the  inquiry  whether  it  is  wise  to  leave 
this  important  instrument  of  correspondence  in  charge  of  corporations 
whose  primary  object  is  gain  to  the  managers  and  stockholders,  and  the 
convenience  of  the  public  secondary  only? 

In  the  report  of  the  department  for  the  fiscal  year  ended 
June  30,  1882,  Mr.  Maynard's  successor,  Mr.  Howe,  states  that 
he  is  forced  to  the  conclusion  "that  the  time  has  fully  come" 
when  the  telegraph  and  postal  service  should  be  embraced  under 
one  management. 

One  of  many  bills  introduced  from  time  to  time  in  Congress 
in  the  attempt  to  overcome  the  legislative  inertia  on  the  subject 


io8  GOVERNMENT   OWNERSHIP   OF 

of  postal  telegraph  was  that  presented  on  January  14,  1884,  by 
Senator  Hill  of  Colorado.  Senator  Hill's  bill  provided  for  the 
establishment  of  a  system  of  postal  telegraphs  in  the  United 
States,  and  in  supporting  it  he  said  that  Governments  every- 
where had  undertaken  the  management  of  the  telegraph  business. 

He  pointed  his  opinion  that  government  supervision  of  the 
telegraph  would  result  in  great  benefits  by  a  reference  to  the 
enormous  increase  in  the  postal  business  in  this  country  and  in 
Great  Britain  after  a  reduction  in  the  rate  of  postage  and  the 
consequent  quickening  of  commerce  and  business  as  well  as  the 
brightening  of  the  ties  of  social  life. 

The  attempt  of  Senator  Hill  to  secure  the  desired  legislation 
was  unsuccessful,  as  have  been  some  two  dozen  similar  attempts 
since  1871.  At  least  three-fourths  of  these  bills  have  been  fav- 
orably reported  on  by  House  and  Senate  committees. 

In  1889  Postmaster  General  Wanamaker,  in  reporting  on  an 
effort  to  secure  reduced  telegraph  rates  for  the  Government, 
says : 

The  idea  was  to  connect  the  telegraph  wires  with  all  the  free-delivery 
offices  and  to  take  messages  at  or  about  one-half  the  current  rates,  deliv- 
ering by  letter  carriers  by  regular  deliveries. 

With  no  other  liability  for  telegraphic  messages  than  that  for  the 
ordinary  mail ;  with  no  necessity  for  booking  messages,  or  auditing  and 
keeping  cash  accounts;  by  using  postage  stamps  in  payment  as  for  letter 
postage,  the  cost  of  the  service  would  be  reduced  and  the  rate  could  be 
fairly  reduced  on  telegraphic  messages.  The  delivery  of  such  telegraphic 
messages  in  another  city  on  the  day  they  originated  seemed  to  me  to  offer 
an  accommodation  that  vast  numbers  of  people  would  avail  themselves  of, 
especially  for  communications  of  a  social  and  family  nature,  if  the  service 
could  be  performed  at  lower  rates.  The  equipment  of  the  post  offices 
seemed  to  be  all  ready  to  do  this  cheaper  service. 

In  1890,  Mr.  Wanamaker  again  urges  the  control  of  the  tele- 
graph by  the  Post  Office  Department  through  contracting  with 
telegraph  companies  to  furnish  lines,  instruments,  and  operators, 
and  to  transmit  messages  at  rates  fixed  by  the  Government,  all 
of  which  would  go  to  the  contracting  company  except  2  cents  per 
message,  which  would  be  retained  by  the  Post  Office  Depart- 
ment to  cover  the  expense  of  collecting  and  distributing.  He 
argues  that  the  people  have  the  right  to  the  use  of  the  plant 
of  the  Postal  Service  as  a  means  of  reducing  the  cost  of  tele- 
graphic correspondence  and  for  the  instant  transmission  of  postal 
money  orders. 


TELEGRAPH   AND   TELEPHONE  109 

Taking  up  this  subject  again  in  1891,  Mr.  Wanamaker  urges 
government  control  of  the  telephone  system,  as  well  as  the  tele- 
graph system,  and  deals  particularly  with  reference  to  the  ob- 
jection that  such  course  is  unconstitutional. 

In  the  concluding  report  of  his  administration  as  Postmaster 
General  for  the  year  ended  June  30,  1892,  Mr.  Wanamaker 
again  urges  the  adoption  of  his  plan  to  contract  with  some  tele- 
graph company  to  connect  post  offices  by  telegraph,  commencing 
with  the  most  important  offices  and  proceeding  gradually  in  the 
order  of  probable  usefulness,  reducing  the  cost  of  telegrams 
by  the  use  of  post  office  buildings,  the  use  of  telegraph  stamps, 
the  collection  of  messages  in  street  or  house  boxes  and  the 
delivery  by  carriers,  contracting  with  the  company  to  perform 
service  with  its  own  operators  for  a  fixed  sum  per  message  which 
the  department  would  charge  the  people,  adding  a  i-cent  stamp 
for  local  delivery  and  a  special-delivery  stamp  when  instant 
delivery  is  desired.  He  advances  no  new  argument. 

Mr.  Wanamaker  was  the  first  Postmaster  General  to  advocate 
government  ownership  of  the  telephone  service. 

The  disastrous  financial  panic  of  1893  and  the  consequent 
depression  was  reflected  the  following  year  in  the  annual  report 
of  Postmaster  General  Bissell,  who  took  a  conservative  attitude 
and  deprecated  not  only  the  acquisition  by  the  Government  of 
the  telegraph  service  but  any  new  departure  in  the  extension  of 
the  Postal  Service  and  argued  against  government  ownership. 

Synopsis  of  Argument  Prepared  by  Prof.  Frank  Parsons 
[1901-1903] 

Henry  Clay,  Charles  Sumner,  Hannibal  Hamlin,  Gen.  Grant, 
Senators  Edmunds,  Dawes,  Chandler,  and  N.  P.  Hill.  Gen.  B.  F. 
Butler,  John  Davis,  Postmaster  Generals  Johnson,  Randall, 
Maynard,  Howe,  Creswell,  and  Wanamaker,  Prof.  Morse,  the 
inventor  of  the  telegraph;  Cyrus  W.  Field,  the  founder  of  the 
Atlantic  cable  and  a  director  in  the  Western  Union  Co.;  James 
Gordon  Bennett,  Prof.  Ely,  Lyman  Abbott,  B.  O.  Flower,  Judge 
Clark,  Henry  D.  Lloyd,  Dr.  Taylor,  T.  V.  Powderly,  Samuel 
Gompers,  Marion  Butler,  and  other  eminent  men  in  every  walk 
of  life  have  championed  government  ownership  in  America. 
Legislatures,  city  councils,  boards  of  trade,  chambers  of  com- 


no  GOVERNMENT   OWNERSHIP   OF 

merce,  and  labor  organizations ;  numerous  newspapers,  and  the 
Prohibitionist  and  Populist  Parties,  favor  it.  Opposition  is 
confined  to  the  capitalists  controlling  the  present  private  system 
of  telegraphy.  Senator  Edmunds  in  1883  introduced  a  bill  to 
establish  a  postal  telegraph;  another  in  1885,  and  another  in 
1887.  Senator  Dawes  from  1873  to  1888  introduced  four  bills 
to  provide  for  the  transmission  of  correspondence  by  telegraph. 
Altogether  more  than  70  bills  have  been  introduced  into  Con- 
gress for  the  purpose  of  establishing  a  postal  telegraph.  Eighteen 
times  committees  of  the  House  and  Senate  have  reported  on 
the  question,  sixteen  times  favorably  and  twice  against.  Of  the 
two  adverse  reports,  one  was  a  2-page  document,  mildly  ex- 
pressing the  opinion  of  the  committee  that  the  telegraph  monop- 
oly should  be  regulated,  but  that  public  ownership  was  not  best 
because  of  the  increase  of  patronage  and  because  the  committee 
thought  it  would  cost  more  to  run  it  under  governmental  control. 
No  evidence  was  taken,  no  investigation  was  made.  The  other 
adverse  report  was  made  in  1869,  upon  the  ground  that  the  five 
years  of  security  given  to  the  companies  by  the  law  of  1866  had 
not  elapsed. 

A  large  part  of  the  people  have  no  facilities  for  transmitting 
telegraph  messages  under  the  present  private  ownership  plan. 
The  advantages  of  a  change  are  apparent  when  it  is  shown  that 
the  Western  Union  has  21,000  offices  and  the  post  office  70,000. 

Telegraph  rates  in  this  country  are  25  cents  to  $i  for  10 
words  and  2  to  7  cents  for  each  word  in  addition ;  the  night  rates 
are  somewhat  less.  In  Europe  the  usual  rate  is  about  10  cents 
for  20  words  and  one-half  a  cent  to  a  cent  for  each  further  word. 
The  figures  submitted  by  the  Western  Union  to  show  that  the 
distances  in  this  country  are  much  greater  than  in  Europe  were 
greatly  exaggerated. 

The  Western  Union  claims  that  wages  are  much  higher  in 
this  country  than  in  Europe.  On  data  furnished  it  appears  that 
the  average  salary  of  operators  in  this  country  does  not  exceed 
$333>  while  the  average  in  Europe  is  $320,  but  in  many  cases, 
Great  Britain  and  France,  for  instance,  the  average  salary  of 
the  operators  is  much  greater  than  in  this  country.  Besides,  ac- 
cording to  the  Western  Union,  the  operators  in  this  country  do 
twice  as  much  work  as  European  operators. 

In  attempting  to  justify  its  charges  the  Western  Union  claims 


TELEGRAPH   AND   TELEPHONE  in 

that  Europe  operates  the  telegraph  service  at  a  loss.  On  the 
contrary,  France,  England,  Switzerland,  Sweden,  Prussia,  Bel- 
gium, and  other  countries  make  a  profit,  and  Europe  as  a  whole 
does  the  same.  The  Western  Union  ciphered  out  a  loss  for 
Europe  by  adding  the  cost  of  construction  into  the  operating 
expenses.  Rates  are  higher  here  because  private  enterprise  aims 
at  dividends,  while  public  enterprise  is  satisfied  to  serve  the 
people  at  about  cost.  In  Great  Britain  the  18,000,000  messages 
sent  in  1873  under  public  ownership  cost  the  public  just  what 
9,000,000  would  have  cost  under  the  displaced  private  ownership. 
In  the  spring  of  1895,  Mr.  Wanamaker  stated  that  he  thought  a 
uniform  lo-cent  rate  for  20  words,  regardless  of  distance,  could 
be  established  and  yet  leave  the  system  self-sustaining.  He 
based  his  opinion  on  the  rates  before  the  Western  Union  absorbed 
other  companies  and  shut  off  competition. 

The  present  telegraphic  system  in  America  is  indicted  for  its 
illtreatment  of  employees  and  a  general  abuse  of  the  employing 
power — child  labor;  overworked  operators;  long  hours  and 
small  pay  for  those  who  do  the  work;  less  wages  to  women 
than  to  men  for  the  same  work;  favoritism  and  unjust  distinc- 
tions between  men  in  the  same  service;  a  settled  policy  of  re- 
ducing wages  and  increasing  work ;  denial  of  the  right  of  petition, 
the  right  of  organization,  and  the  right  to  consideration  because 
of  long  and  faithful  service.  In  1890  the  evidence  was  that 
the  average  pay  of  telegraph  operators  was  $40  to  $45  a  month, 
that  girls  were  employed  in  some  instances  as  low  as  $12  to  $15 
a  month,  and  quite  a  number  were  paid  no  more  than  $20  to 
$35.  Abuse  of  the  employing  power  such  as  listed  above  results 
in  strikes  and  poor  service,  manifested  in  slowness,  inaccuracy, 
insufficient  facilities,  failure  to  guard  the  secrecy  of  messages, 
etc.  Examples  are  cited  illustrative  of  these  features.  The 
Western  Union  Co.  is  charged  with  "discrimination  between 
the  messages  of  different  customers,  both  as  to  rates  and  order 
of  transmission."  Instances  are  given.  Monopoly  of  the  news 
service  results  from  private  ownership  of  the  telegraph.  Ref- 
erence is  made  to  the  censorship  of  the  Associated  Press  under 
its  arrangement  with  the  Western  Union. 

Misgovernment  and  political  corruption  are  evils  to  which 
the  private  telegraph  contributes,  through  a  distribution  of  franks 
to  Government  officials,  both  State  and  Federal. 


H2  GOVERNMENT   OWNERSHIP    OF 

Another  evil  of  private  ownership  of  the  telegraph  is  the 
dangerous  concentration  of  power  and  wealth  in  the  hands  of  a 
few  irresponsible  persons.  The  Western  Union  in  its  compact 
with  the  newspapers  reserves  to  itself  the  exclusive  right  of 
furnishing  commercial  and  financial  news  to  individuals  and  as- 
sociations. 

In  the  hands  of  private  individuals  the  telegraph  enables 
them  to  monopolize  intelligence  and  to  perform  the  greatest 
operations  in  commerce  and  other  departments  of  business. 

The  present  telegraph  system  is  a  menace  to  the  national 
strength  in  time  of  war.  The  telegraph  is  one  of  the  most 
important  instruments  of  war  and  the  Nation  ought  to  own  the 
system  on  military  grounds,  if  there  were  no  other  reason. 

Private  monopoly  means  taxation  without  representation. 
The  monopolist  is  able  to  charge  more  than  his  service  would 
be  worth  in  a  fair  competitive  market.  Government  is  a  union 
of  all  for  the  benefit  of  all. 

Economy,  good  service,  and  general  satisfaction  have  char- 
acterized the  national  telegraph  service  abroad,  while  in  this 
country  the  opposite  is  true. 

New  York  capitalists  were  eager  to  contract  with  the  Gov- 
ernment on  the  Wanamaker  basis  or  the  basis  of  a  uniform  25- 
cent  rate  regardless  of  distance.  This  plan  avoids  the  objections 
usually  urged  against  a  public  telegraph.  It  would  not  increase 
the  Government  patronage,  nor  require  any  public  expenditure, 
nor  limit  private  enterprise,  and  yet  it  would  render  the  country 
an  inestimable  service  by  cheapening  the  telegraph  and  making 
it  more  accessible  to  the  people.  Its  disadvantages  are  that  it 
still  leaves  the  rates  higher  than  need  be  in  order  to  give  the 
private  capitalists  the  profit  they  demand;  that  although  the 
business  would  be  essentially  a  public  one,  carried  on  in  the 
Post  Office  and  largely  by  means  of  its  labor  and  capital,  yet 
the  profit  would  chiefly  go  ^o  private  parties;  that  it  would 
extend  the  pernicious  contract  system,  which  is  far  more  liable 
to  abuse  than  the  patronage;  that  it  does  not  eliminate  the  an- 
tagonism of  interest  between  the  telegraph  management  and  the 
public;  that  it  does  not  diminish  but  largely  increases  the  tele- 
graph stock  to  be  gambled  with  and  manipulated;  that  it  leaves 
the  telegraph  workers  to  the  mercy  of  corporate  greed,  etc. 


TELEGRAPH   AND   TELEPHONE  113 

Another  way  of  handling  the  telegraph  question  would  be 
to  lease  lines  from  private  companies  and  operate  them. by  the 
postal  force.  This  would  be  better  than  the  first  plan,  with  a 
good  civil  service,  since  it  accomplishes  the  same  extension  of 
facilities  and  still  greater  reduction  of  rates.  The  objections 
are  that  it  would  still  pay  out  a  considerable  rental  profit  which 
had  better  stay  with  the  people  and  it  would  retain  the  contract 
method  to  some  extent. 

A  third  plan  would  be  for  the  Government  to  buy  existing 
lines  and  connect  them  with  the  Post  Office  system.  One  trouble 
with  this  plan  is  that  existing  lines  are  in  large  part  of  very 
inferior  quality  and  the  people  would  probably  have  to  pay  five 
or  six  times  the  value  of  the  telegraph.  In  a  speech  on  the 
floor  of  the  Senate,  January  20,  1883,  Senator  Edmunds  stated 
that  he  was  not  in  favor  of  the  Government  purchasing  existing 
lines,  but  that  he  favored  the  building  of  its  own  lines  by  the 
Government.  Senator  John  Sherman,  of  Ohio,  expressed  himself 
in  a  similar  manner,  and  in  1888  the  Committee  on  Commerce 
stated  that  it  was  its  belief  that  the  Government  should  construct 
its  own  lines. 

A  fourth  plan  would  be  for  the  Government  to  ask  private 
parties  to  build  the  lines,  or  supply  the  money  for  building 
them,  on  condition  that  said  parties  should  receive  a  specified 
interest  on  their  capital;  that  all  profits  beyond  said  interest 
should  go  toward  paying  off  the  principal,  and  that  when  it  should 
be  entirely  paid  the  lines  should  revert  to  the  Government  free 
of  debt — a  sort  of  building  loan  association  plan. 

A  fifth  plan  would  be  for  the  Nation  to  build  a  telegraph 
system  for  itself.  It  may  first  build  lines  connecting  the  great 
centers  of  population,  and  the  revenue  thus  obtained  from  year 
to  year  could  be  used  to  extend  the  lines,  or  it  may  establish  a 
comprehensive  plant  at  the  start.  The  construction  and  main- 
tenance of  the  lines  could  be  placed  in  charge  of  the  Engineer 
Corps  of  the  Army.  The  rank  and  file  of  the  Army  might  also 
supply  a  part  of  the  ordinary  labor  required  for  construction  and 
maintenance. 

Superintendence  of  the  office  work  could  be  confided  to  the 
postal  officers,  with  very  little  addition  to  the  force.  Mr.  Wana- 
maker  stated  that  in  three-fourths  of  the  post  offices  no  addi- 


ii4  GOVERNMENT   OWNERSHIP    OF 

tional  attendant  would  be  needed.  In  England  the  regular  postal 
staff  does  the  telegraphing  in  all  the  small  offices.  One-half  of 
the  regular  staff  in  Belgium  are  telegraph  operators. 

A  large  saving  would  be  made  in  rentals  and  the  cost  of  heat 
and  light.  The  Government  would  not  have  to  pay  dividends 
on  watered  stock  or  on  the  real  investment.  Costs  of  litigation, 
counsel  fees,  lobby  expenses,  and  big  salaries  would  be  saved. 
There  would  be  no  building  of  useless  lines  nor  wastes  of  com- 
petitive telegraphy,  the  money  abstracted  from  the  people  by 
the  discriminative  use  of  the  telegraph  for  speculative  purposes 
would  remain  in  their  pockets,  and  the  cheapening  of  communi- 
cation would  bring  the  whole  people  closer  together,  give  them 
a  better  understanding  of  the  markets,  and  develop  the  business 
transactions  of  the  continent. 

Postal  Act  of  1901 

The  postal  act  of  January  22,  1901,  contained  the  following 
provision : 

The  Postmaster  General  is  directed,  if  he  has  sufficient  available 
information  to  enable  him  to  do  so,  to  report  to  Congress  the  probable 
cost  of  connecting  a  telegraph  and  telephone  system  with  the  postal  service 
by  some  feasible  plan. 

This  direction  of  Congress  does  not  appear  to  have  been 
complied  with. 

Reports  of  Postmaster  General  Payne,  Cortelyou,  and  Hitchcock 

The  treatment  accorded  to  the  subjects  of  postal  telegraph 
and  postal  telephones  in  the  annual  reports  of  Postmasters 
General  Payne,  Cortelyou,  and  Hitchcock  are  as  follows : 

The  extension  of  the  rural  free-delivery  service  and  the  consequent 
increase  in  the  use  of  the  mails  by  the  patrons  residing  along  the  rural 
routes,  together  with  the  extension  of  the  telephone  service  into  the  farm- 
ing districts  of  the  country,  has  suggested  the  propriety  of  extending  the 
privilege  of  the  special  delivery  of  such  letters,  or  the  contents  thereof,  by 
means  of  the  telephone. 

The  telegraph  lines  in  the  United  States  should  be  made  a  part  of  the 
postal  service  and  operated  in  conjunction  with  the  mail  service.  Such  a 
consolidation  would  unquestionably  result  in  important  economies  and 
permit  the  adoption  of  lower  telegraph  rates. 


TELEGRAPH   AND   TELEPHONE  115 

Report  of  Postmaster  General  Burleson:   1913 

Postmaster  General  Burleson  has  included  in  the  Annual  Re- 
port of  the  Postmaster  General  for  the  fiscal  year  ended  June  30, 
1913,  the  statement: 

A  study  of  the  constitutional  purposes  of  the  postal  establishment  leads 
to  the  conviction  that  the  Post  Office  Department  should  have  control  over 
all  means  of  the  communication  of  intelligence. 

Present  Situation 

Government  ownership  of  the  electrical  means  of  transmit- 
ting intelligence  is  brought  to  the  attention  of  the  American 
people  of  1913  with  the  indorsement  of  nearly  every  Postmaster 
General  since  the  Civil  War,  with  a  score  of  favorable  reports 
by  committees  of  Congress,  and  by  the  example  of  practically 
every  other  nation  of  the  civilized  world.  More  than  7°  bills 
have  been  introduced  in  Congress  to  accomplish  it.  Meanwhile 
the  private  operation  of  the  telegraphic  and  telephonic  facilities 
has  resulted  in  a  virtual  monopoly  by  which  the  people  are 
annually  taxed  vast  sums  for  which  they  receive  no  adequate 
return. 

Annual  Report  of  Postmaster  General  Albert  Sidney 
Burleson,   1913. 

The  last  actual  postal  surplus  was  announced  by  Postmaster 
General  Gresham  30  years  ago,  when  fair  account  was  taken  by 
him  in  the  financial  statement  of  the  department  of  outstanding 
obligations.  The  practice  of  reporting  outstanding  obligations 
was  continued  by  a  number  of  his  successors.  In  recent  years, 
however,  Postmasters  General  have  stated  the  persistently  recur- 
ring postal  deficit  in  terms  of  the  excess  of  audited  expenditures 
over  audited  revenues. 

By  the  use  of  this  faulty  method  a  surplus  of  $219,118.12  was 
shown  in  the  annual  report  of  the  Department  for  the  fiscal  year 
191 1,  in  which  the  claim  was  advanced  that  the  service  had  finally 
been  made  self-supporting.  Taking  into  account  the  outstanding 
obligations  for  that  year,  which  were  not  reported,  there  was  in 
reality  a  deficit  of  approximately  $732,301.90.  The  actual  deficiency 
for  the  year  1911,  based  on  payments  on  account  of  that  year 
which  were  made  up  to  June  30,  1913,  was  $720,768.63,  and  obliga- 
tions are  still  outstanding,  amounting  to  approximately  $11,533.27. 


ii6  GOVERNMENT   OWNERSHIP    OF 

It  is  gratifying  to  note  that  on  this  basis  [reporting  of  out- 
standing accounts  and  obligations]  the  total  expenses  of  main- 
taining the  postal  service  for  the  fiscal  year  ended  June  30,  1913, 
is  found  to  be  exceeded  by  the  revenues  for  the  same  period,  that 
there  is  an  actual  surplus  of  $3,841,906.78,  and  that  the  postal 
service  is  now  for  the  first  time  since  1883  self-supporting. 

The  dominant  policy  of  the  present  administration  will  be  to 
conduct  the  postal  service  for  the  convenience  of  the  public  and 
not  for  profit.  Its  controlling  purpose  will  be  to  promote  efficiency 
by  the  complete  standardization  of  the  service,  which  will  be 
attained  by  harmonizing  equipment,  adjusting  the  personnel,  and 
securing  the  greatest  possible  cooperation  in  every  quarter. 

The  prime  consideration  in  perfecting  the  personnel  of  the 
postal  service  shall  be  to  recognize  efficiency  and  to  eliminate 
partisanship.  It  is  the  earnest  hope  that  ultimately  all  positions 
will  be  covered  under  the  classified  civil  service  and  that  merit  and 
faithfulness  will  be  the  sole  consideration  in  making  appointments 
as  well  as  promotions. 

The  same  reasons  that  led  to  the  adoption  of  the  constitutional 
provision  for  a  Government  monopoly  over  the  receipt,  transmis- 
sion and  delivery  of  mail  matter  make  it  improper  to  operate  this 
service  in  accordance  with  policies  characteristic  of  private  enter- 
prise. There  is  no  incentive  to  private  enterprise  to  extend  service 
unless  such  extension  will  increase  gross  receipts  in  greater 
proportion  than  expenses.  Therefore,  successful  commercial 
organizations  are  not  proper  models  for  the  Post  Office  Depart- 
ment, except  that  the  same  modern  business-like  methods  may  in 
some  instances  be  applicable  to  both.  In  the  extension  of  service 
and  in  the  imposition  of  charges  the  Government  must  be  guided 
not  by  the  consideration  of  profit  but  by  the  needs  of  the  people, 
who  have  a  right  to  expect  the  most  efficient  postal  service  admin- 
istered in  the  most  economical  manner  possible  and  made  available 
to  them  at  rates  involving,  for  the  service  as  a  whole,  no  element 
of  taxation.  The  service  should  be  extended,  with  due  regard  for 
the  exigencies  of  public  finance,  wherever  its  benefits,  commercial 
and  social,  warrant  the  expenditure  necessary,  irrespective  of 
whether  or  not  the  revenue  from  each  extension  will  defray  the 
cost  thereof. 

The  function  of  the  Post  Office  Department  is  to  serve  the 
public,  and  it  should  not  attempt  profit  making.  It  is  expected 


TELEGRAPH   AND   TELEPHONE  117 

that  after  the  allowance  of  proper  compensation  to  railroads  for 
all  service  rendered  there  will  come  annually  hereafter  as  the 
result  of  the  development  of  the  parcel-post  service  an  increasing 
surplus.  It  should  be  the  policy  of  the  department  not  to  become 
a  revenue  producer  for  the  Government,  but  from  time  to  time  to 
absorb  this  surplus  by  reducing  the  cost  of  the  service,  increasing 
its  efficiency,  and  enlarging  the  means  of  communication  between 
our  people.  The  indication  of  largely  increased  postal  revenues 
justifies  a  serious  consideration  at  this  time  of  the  subject  of 
adding  the  telegraph  and  telephone  as  a  part  of  our  postal  service. 

Postal  Telegraphs  and  Telephones 

A  study  of  the  constitutional  purposes  of  the  postal  establish- 
ment leads  to  the  conviction  that  the  Post  Office  Department 
should  have  control  over  all  means  of  the  communication  of 
intelligence.  The  first  telegraph  line  in  this  country  was  main- 
tained and  operated  as  a  part  of  the  postal  service,  and  it  is  to  be 
regretted  that  Congress  saw  fit  to  relinquish  this  facility  to  private 
enterprise.  The  monopolistic  nature  of  the  telegraph  business 
makes  it  of  vital  importance  to  the  people  that  it  be  conducted  by 
unselfish  interests,  and  this  can  be  accomplished  only  through 
Government  ownership. 

The  act  of  July  24,  1866,  providing  for  the  government  ac- 
quisition of  the  telegraph  lines  upon  payment  of  an  appraised 
valuation  and  the  act  of  1902  directing  .the  Postmaster  General  "to 
report  to  Congress  the  probable  cost  of  connecting  a  telegraph 
and  telephone  system  with  the  postal  service  by  some  feasible 
plan"  are  evidences  of  the  policy  of  this  Government  ultimately 
to  acquire  and  operate  these  electrical  means  of  communication 
as  postal  facilities,  as  is  done  by  all  the  principal  nations,  the 
United  States  alone  excepted. 

The  successful  operation  of  the  parcel  post  has  demonstrated 
the  capacity  of  the  Government  to  conduct  the  public  utilities 
which  fall  properly  within  the  postal  provision  of  the  Constitu- 
tion. 

Every  argument  in  favor  of  the  government  ownership  of 
telegraph  lines  may  be  advanced  with  equal  logic  and  force  in 
favor  of  the  government  ownership  of  telephone  lines.  It  has 
been  competently  decided  that  a  telephone  message  and  a  tele- 
gram are  the  same  within  the  meaning  of  the  laws  governing  the 

11 


ii8  GOVERNMENT   OWNERSHIP    OF 

telegraph  service,  and  therefore  it  is  believed  that  the  statute 
enabling  the  Government  to  acquire,  upon  the  payment  of  an 
appraised  valuation,  the  telegraph  lines  of  the  country,  will  enable 
the  Government  to  acquire  the  telephonic  network  of  the  country. 
While  it  is  true  that  the  telephone  companies  have  not  complied 
with  the  requirements  of  section  5267,  Revised  Statutes,  this  can 
not  be  held  to  nullify  the  intent  of  the  law,  since  the  nonperform- 
ance  on  the  part  of  the  Government  of  any  of  its  constitutional 
privileges  in  nowise  surrenders  the  right  to  exercise  these  privi- 
leges whenever  the  best  interests  of  the  Nation  demand. 

Since  June  last  the  department  has  been  conducting  a  careful 
investigation  to  determine  the  desirability  and  practicability  of 
extending  the  government  ownership  and  control  of  means  of 
communication,  with  a  view  to  the  acquisition  by  the  Government 
of  the  telegraph  and  telephone  facilities,  to  be  operated  as  an 
adjunct  to  the  postal  service.  The  Postmaster  General  is  now 
engaged  in  reviewing  the  data  collected  and  later,  if  desired,  will 
submit  same  to  the  appropriate  committees  of  Congress  for  their 
consideration. 

Since  the  first  authorization  of  experimental  aerial  mail  ser- 
vice in  1911  the  department  has  given  like  permission  in  54 
instances.  A  considerable  number  of  pieces  of  mail  has  been 
carried  in  this  manner,  but  without  expense  to  the  department. 
In  connection  with  the  transportation  service  an  item  has  been 
included  in  the  1915  estimates  for  $50,000  to  provide  for  an 
experimental  service.  It  is  believed  that  there  are  sections  of 
the  country  where,  because  of  topographical  conditions,  this  class 
of  service  might  be  advantageously  employed  in  some  cases. 

On  June  30  the  Postal  Savings  System  was  in  operation  at 
12,158  offices,  of  which  8,227  were  of  the  presidential  grade  and 
3,931  of  the  fourth  class.  Savings  facilities  have  also  been  ex- 
tended to  662  branches  and  stations,  making  a  total  of  12,820 
depositories  in  operation  on  that  date.  Since  June  30  the  service 
has  been  extended  to  210  presidential  offices  not  theretofore 
designated  as  depositories,  completing  the  installation  of  savings 
facilities  at  all  presidential  post  offices,  except  those  in  the 
Hawaiian  Islands  and  in  Porto  Rico,  to  which  the  service  will 
soon  be  extended. 

Under  the  law  which  confers  large  powers  on  the  Postmaster 
General,  the  parcel-post  service  will  be  gradually  developed  and 


TELEPHONE  AND   TELEGRAPH  119 

to  such  an  extent  that  the  department  can  be  maintained  on  a 
self-supporting  basis.  The  prodigious  growth  of  this  service, 
which  will  continue  at  an  increasing  rate  as  all  the  people  for 
whose  benefit  it  was  established  accustom  themselves  to  its  use, 
will  so  increase  revenues  that  from  time  to  time  further  reduction 
of  rates  may  be  had  and  additional  increases  of  weight  limit  of 
parcels  authorized. 

Although  there  has  been  some  agitation  in  recent  years  for 
the  elimination  of  the  franking  privilege  and  the  adoption  of 
official  stamps  and  envelopes  in  its  stead,  with  a  view  to  conserv- 
ing the  postal  revenues  by  throwing  the  light  of  publicity  on  the 
free  use  of  the  mails  by  those  to  whom  that  privilege  is  accorded, 
it  is  not  believed  that  there  is  such  abuse  of  the  franking  privi- 
lege as  would  justify  incurring  the  expense  of  manufacturing 
and  distributing  such  envelopes  and  stamps. 

The  amount  of  franked  matter  carried  in  the  mails  during 
the  course  of  a  year  is  very  great,  but  it  should  be  borne  in  mind 
that  the  constant  demands  made  upon  Members  of  Congress  in 
respect  to  official  matters  require  a  vast  amount  of  correspond- 
ence. 

World's  Work.     16:  10651-8.    September,  1908. 

Our    Government's    Wide-Spread    Socialistic    Activities.      John 

Martin. 

He  [Uncle  Sam]  has  proved  his  ability  to  construct  and  oper- 
ate telegraph,  cable,  telephone,  railroad,  and  steamship  lines  with 
business  efficiency.  And  by  the  maintenance  of  cold-storage 
plants,  hospitals,  etc.,  he  has  demonstrated  his  belief  that  he  owes 
a  debt  of  social  service  to  his  citizens  outside  the  States. 

The  United  States  Government  owns  and  operates  one  of  the 
longest  and  most  intricate  commercial  cable  r.nd  telegraph  systems 
in  the  world — the  Washington-Alaskan  system,  which  joins  the 
cities  of  the  United  States  and  the  world  in  general  with  the 
towns  and  cities  of  the  Alaskan  coast,  the  Yukon  Valley,  and  the 
region  around  the  Bering  Straits.  This  Government  cable  would 
reach  from  Newfoundland  to  the  Irish  Coast,  and  the  land  lines 
would  stretch  from  Washington  to  Mexico.  The  Federal  Govern- 
ment built  the  northern  part  of  this  line  through  a  wilderness, 
wild  and  trackless,  and  laid  down  the  thousand  miles  of  ocean 


120  GOVERNMENT   OWNERSHIP    OF 

cable  between  Sitka  and  Seattle  more  cheaply  than  any  of  the 
commercial  cables  were  established  by  private  capital.  When  this 
cable  was  ground  in  two  by  icebergs,  the  gap  was  bridged  by  a 
wireless  system  which  is  at  present  the  only  one  of  its  kind, 
operated  as  a  part  of  a  telegraph  system  and  engaged  in  commer- 
cial business.  After  three  years  of  operation,  this  cable  line  is 
worth  more  than  the  United  States  paid  for  it ;  the  business  done 
over  it  for  commercial  firms  amounts  to  $200,000  a  year ;  the  rates 
are  lower  than  those  charged  by  any  private  company;  and  no 
error  has  yet  been  charged  in  any  of  the  multiform  commercial 
codes  used. 

Cable  and  telegraph  lines  have  also  been  officially  built  and 
operated  in  the  Philippines.  One  section  was  put  through  a  piece 
of  country  so  difficult  to  traverse  that  every  pioneer  lineman  who 
made  the  round  had  to  be  carried  to  a  hospital.  At  present, 
6,322  miles  of  land  lines  and  1,437  miles  of  cable,  besides  twenty- 
four  telephone  systems,  are  operated  in  the  Philippine  Archi- 
pelago at  rates  which  are  fixed  according  to  the  postal  system, 
irrespective  of  distances. 

In  Porto  Rico,  the  Government  is  operating  telegraph  and 
telephone  lines  so  profitably  that  a  few  months  ago  the  price  of 
telegrams  was  reduced.  The  smallest  towns  in  the  most  remote 
part  of  the  Islands  are  connected  with  telegraph  stations  by  the 
telephone. 

In  the  Philippines,  every  post  office  is  a  postal  savings-bank. 
Deposits,  however,  large  or  small,  are  received  at  these  banks  and 
may  be  withdrawn  from  any  other  Government  bank. 

Monthly   Consular    and   Trade   Reports.     No.   332:161-2. 
May,  1908. 

Swiss  Telegraph  and  Telephone  Conducted  by  the  Government. 
R.  H.  Mansfield. 

In  stating  that  the  Swiss  Government  owns  and  operates  all 
the  telegraph  and  telephone  lines  in  the  Confederation,  Consul 
R.  E.  Mansfield,  of  Lucerne,  furnishes  the  following  details  as  to 
their  management : 

The  telegraph  and  telephone  service  extends  to  nearly  every 
town  and  village  in  the  country,  and  every  railway  station  is 
supplied  with  both  systems.  The  service  is  good  and  the  rates 


TELEGRAPH   AND   TELEPHONE  121 

low.  They  are  operated  in  connection  with  the  postal  service, 
every  post  office  being  provided  with  telegraphic  facilities,  and 
practically  all  of  them  with  public  telephones. 

Distances  in  Switzerland  being  short,  the  service  prompt,  and 
the  rates  low,  the  telegraph  and  telephones  are  liberally  patronized. 
Long-distance  connections  are  made  with  all  the  local  or  urban 
telephone  lines,  enabling  patrons  to  communicate  with  all  cities 
and  towns  in  the  country.  There  are  also  international  connections 
with  all  the  countries  bordering  on  Swiss  territory. 

A  feature  of  the  Swiss  telephone  service  is  that  in  addition 
to  owning  and  operating  all  the  lines,  the  Government  manufac- 
tures all  the  instruments  used,  makes  the  insulations,  and  controls 
the  business  absolutely. 

Length  of  Lines,  Revenue,  and  Profit 

The  total  length  of  telephone  lines  in  Switzerland  is  10,548 
miles.  The  annual  rental  charge  for  offices,  business  houses,  and 
residences  is  $12.45  per  year.  An  additional  charge  of  one  cent  is 
made  for  each  call  in  the  town.  For  interurban  or  long-distance 
calls  the  rate  is  2  to  14  cents  for  three  minutes,  according  to 
distance,  14  cents  being  the  maximum  rate  for  any  distance  in  the 
country. 

The  number  of  telephone  subscribers  in  1906  was  53,711. 
During  the  year  there  were  32,071,177  local,  7,251,193  interurban, 
and  299,209  international  calls  over  the  government  telephones. 
The  revenue  from  all  classes  of  calls  for  1906  was  $829,732 ; 
income  from  rent  on  53,711  telephones,  $668,702.  Total,  $1,498,- 

434- 

The  total  length  of  telegraph  lines  in  Switzerland  is  66,683 
miles.  The  total  number  of  telegrams  transmitted  in  1906  was 
4,918,679,  of  which  2,339,956  were  international  and  1,698,838  local. 
The  total  revenue  from  telegrams  for  the  year  was  $1,596,664. 

There  is  a  government  tax  of  30  centimes,  equal  to  a  fraction 
under  6  cents  American  money,  on  each  telegram  sent.  In  addi- 
tion to  this  charge  there  is  a  universal  rate  of  one-half  cent  a 
word  throughout  the  country,  distance  not  being  taken  into  con- 
sideration. A  telegram  of  ten  words  costs  only  n  cents.  The 
international  rate  is  30  cents  per  word  to  New  York,  2  cents  to 
France,  Germany,  Italy,  and  Austria,  5  cents  to  Spain,  6  cents  to 
England,  and  9  cents  to  Russia.  In  addition  to  the  foregoing 


i22  GOVERNMENT   OWNERSHIP    OF 

there  is  a  government  tax  of  10  cents  on  each  international  tele- 
gram or  cable. 

The  total  income  from  telephone  and  telegraph  service  for 
1906  was  $3,095,098;  expense,  $2,231,217;  profit  to  the  Government, 
$863,881.  The  telegraph  and  telephone  service,  like  the  Govern- 
ment railways  and  parcels  post,  and  economically  administered,  the 
object  being  to  render  the  best  service  possible  at  the  lowest 
possible  cost  to  the  people. 

Harper's  Weekly.    57:  25.    March  15,  1913. 

Control    of   Wireless. 

At  midnight  on  December  12,  1912,  wireless-telegraph  operation 
in  the  United  States,  by  virtue  of  a  set  of  regulations  recently 
passed  by  Congress  covering  domestic  and  interstate  stations, 
passed  absolutely  into  the  control  of  the  Government.  The 
enforcement  of  the  radiographic  act  is  placed  in  the  hands  of  the 
Secretary  of  Commerce  and  Labor.  While  it  is  realized  that  most 
wireless  operators  are  not  likely  to  interfere  maliciously  with 
important  messages,  the  idea  of  the  regulations  is  to  make  it 
impossible  for  those  who  are  less  considerate  to  interfere  without 
becoming  subject  to  severe  penalties.  The  violation  of  the  prin- 
cipal regulations  is  made  a  misdemeanor  punishable  with  a  fine 
of  $500  or  imprisonment  for  one  year. 

Such  interference  has  been  a  grave  menace  to  the  system  ever 
since  the  installation  of  radiographic  communication,  and  the 
necessity  for  some  sort  of  authoritative  supervision  over  it  has 
been  recognized  from  the  beginning.  Late  disasters  at  sea 
emphasized  this  necessity,  and  resulted  in  Congressional  action. 
The  London  International  Conference  last  June,  to  which  the 
United  States  was  one  of  the  signatories,  fixed  the  status  of  the 
stations  doing  an  international  business,  and  it  was  on  this  basis 
that  the  regulations  were  enacted  by  Congress. 

The  regulations  fix  the  wave  lengths  of  the  licensed  stations 
and  provide  that  they  shall  at  all  times  be  in  charge  of  a  licensed 
operator.  There  are  regular  license  forms  both  for  stations  and 
for  operators  personally.  To  insure  the  undisturbed  use  of  the 
air  for  government  stations  the  outside  stations  have  to  "keep 
out"  for  the  first  fifteen  minutes  of  each  hour,  during  which  time 


TELEGRAPH   AND   TELEPHONE  123 

the  government  stations  can  send  without  interference.  All 
licensed  shore  stations  also  are  required  to  listen  for  not  less  than 
two  minutes  at  intervals  to  catch  any  distress  signals  that  may  be 
going.  In  case  a  distress  signal  is  sent  from  any  vessel,  then  all 
stations  except  that  to  which  the  call  is  addressed  must  keep  out 
until  all  business  in  connection  with  such  a  call  is  finished.  Any 
station  sending  out  a  fraudulent  distress  call  is  guilty  of  a  mis- 
demeanor. 

There  are  about  one  thousand  ships  under  the  government 
regulations  that  are  compelled  to  carry  wireless,  and  provision  is 
made  for  an  auxiliary  engine  to  furnish  power  to  the  ship's 
radio  apparatus  in  case  of  accident  to  the  regular  machinery  of 
the  vessel.  Provision  is  also  made  for  ships  within  interference 
distance  of  a  government  shore  station  to  operate  with  reduced 
electrical  power,  except  in  case  of  distress,  when  they  can  use 
any  power  or  any  wave  length.  The  Department  of  Commerce 
and  Labor  has  so  far  granted  about  350  licenses  to  operators,  and 
this  number  will  steadily  increase. 

British  Post  Office  Electrical  Engineers'  Journal.  July  i,  1911. 

Telephones  in  England  and  the  U.  S.  A.     T.  F.  Purves. 

So  far  as  telephones  at  least  are  concerned,  we  in  this  country 
have  always  freely  admitted  the  immense  contributions  to  the 
development  of  the  art  which  have  come  to  us  from  across  the 
Atlantic.  America  was  the  cradle  of  the  telephone,  and  has  been, 
from  the  first,  peculiarly  its  home.  Its  telephone  engineers  have 
led  the  world.  The  multiple  switchboard,  which  first  enabled 
large  numbers  of  lines  to  be  handled  in  one  exchange,  the  com- 
mon battery  lamp  signalling  system,  which  greatly  improved  the 
service  and  reduced  its  working  costs,  and  the  automatic  or 
machine  systems  of  telephony,  which  aim  at  the  elimination  of 
the  human  agency  of  the  operator,  are  all  the  product  of  Amer- 
ican brains,  and  many  of  the  original  and  most  notable  pioneers 
of  these  developments  are  still  in  active  and  responsible  control. 

But  I  would  not  give  all  the  credit  for  the  wonderful  develop- 
ment which  has  scattered  eight  millions  of  telephones  up  and 
down  the  United  States  to  their  engineers  and  commercial  man- 
agers. The  American  public  has  taken  to  the  telephone  as  a  duck 
takes  to  water,  and  its  insistent  demand  has  been  a  continuous 


124  GOVERNMENT   OWNERSHIP    OF 

spur  to  those  in  whose  hands  the  provision  of  the  service  has 
rested.  Its  progress  has  been  greatly  helped  by  the  absence  of 
many  of  the  facilities  for  cheap  and  rapid  postal  and  telegraph 
communication,  to  which  we  on  this  side  are  so  accustomed  that 
we  have  ceased  to  notice  them.  The  post  is  uncertain,  and  in 
country  districts  people  have  sometimes  to  travel  a  long  way  to 
post  or  obtain  their  letters.  It  is  slow  cbmpared  with  ours, 
especially  for  internal  city  communications.  The  telegraph  has 
been  costly  and  poorly  developed.  Even  at  the  present  day  there 
is  a  vast  rural  community  which  it  does  not  serve  at  all. 

I  think  the  tendency  to  the  erection  of  tremendously  high 
buildings  in  American  cities  has  also  helped  the  telephone.  When 
a  man's  office  is  perched,  it  may  be,  on  the  twentieth  or  thirtieth 
floor,  he  wants  to  do  as  much  business  as  possible  without  going 
outside,  and  the  telephone  is  a  sine  qua  non. 

But  outside  these  considerations  I  think  the  telephone  is  better 
suited  to  American  business  methods  than  to  English.  The 
American  makes  important  contracts  by  word  of  mouth  and  is 
quite  contented  to  do  much  of  his  business  by  telephone.  He  has 
recognized  it  as  the  greatest  time-saver  ever  invented,  and  as  a 
business-bringer  that  he  cannot  afford  to  be  without  either  in  his 
office  or  his  private  house.  Consequently  he  sees  that  he  gets  it, 
and  he  doesn't  mind  paying  for  it.  When  the  same  attitude 
becomes  general  on  this  side  of  the  water  we  are  not  likely  to 
hear  so  much  of  England's  backwardness  in  telephone  develop- 
ment. 

The  number  of  "Independent"  companies  runs  into  hundreds. 
Some  of  them  are  large  and  comparable  with  the  Bell  companies, 
but  for  the  most  part  they  are  quite  small.  The  operations  of  the 
small  companies  are,  in  many  cases,  confined  to  a  single  town. 
They  came  into  existence  as  the  result  of  local  enterprise,  on  the 
expiration  of  the  Bell  patents  several  years  ago,  with  the  idea  of 
cheapening  the  service  by  competition.  Taken  altogether  they 
now  own  about  half  the  total  of  8,000,000  telephones.  The  spirit 
of  competition  between  the  Bell  companies  and  the  Independent 
companies  is  very  keen.  It  has  banded  the  Independents  into  a 
fairly  coherent  group,  which  strives  with  might  and  main,  and 
with  a  vast  amount  of  sound  and  fury,  to  get  the  better  of  its 
formidable  rival.  Many  of  the  advertisements  and  counter- 
advertisements  are  distinctly  amusing,  and  the  battle  is  followed 


TELEGRAPH   AND   TELEPHONE  125 

with  relish  and  appreciation  by  the  general  public.  The  Bell 
group  has  the  advantage  in  organization,  and  in  the  possession  of 
its  fine  system  of  intercommunicating'  long-distant  lines;  on  the 
other  hand  the  balance  of  local  sentiment  and  local  capital  invest- 
ment is  generally  with  the  Independent  companies.  There  is,  of 
course,  no  intercommunication  between  rival  systems — the  Jews 
have  no  dealings  with  the  Samaritans— and  the  quasi-competition 
plus  intercommunication  which  the  British  Post  Office  has  for 
some  years  been  carrying  on  with  the  National  Telegraph  Com- 
pany is  beyond  their  comprehension.  Consequently  many  people 
have  to  rent  telephones  from  both  the  companies  in  their  district  in 
order  to  keep  in  touch  with  their  business  associates,  which  is,  of 
course,  a  very  unsatisfactory  state  of  matters.  Generally  speak- 
ing the  tariffs  of  the  independents  are  lower  than  those  of  the 
Bell  companies  in  the  same  town.  Where  the  opposite  is  the  case 
the  Independents  claim  that  the  rates  of  their  opponents  have 
come  down  as  a  result  of  competition,  and  in  most  cases  I  dare 
say  they  are  right. 

The  number  of  free  services  given  by  many  American  com- 
panies is  rather  noticeable;  by  this  I  mean  little  incidental  ser- 
vices for  which  no  charge  is  made.  For  example,  it  is  quite  an 
ordinary  thing  for  a  person  to  give  the  telephone  exchange  notice 
that  they  desire  to  be  awakened  at  a  particular  hour  next  morn- 
ing, or  even  to  make  an  arrangement  for  every  morning.  And 
the  telephone  company  does  it !  At  Chicago  we  were  told  that  no 
fewer  than  80,000  subscribers  in  a  day  call  up  to  inquire  the 
correct  time — and  they  get  it.  Election  results  and  the  results  of 
baseball  matches  and  other  sporting  events  are  also  circulated 
freely  to  all  who  want  them.  In  these  matters  there  is  no  scruple 
about  unfair  competition  with  the  regular  news  agencies,  such 
as  disturbs  the  gentle  hearts  of  English  telephone  authorities. 

I  am  afraid  I  must  admit  that  the  telephone  service  is  dis- 
tinctly smarter  in  the  large  towns  of  America  than  it  is  with  us. 
We  have  plant  and  equipment  practically  identical  with  that  of 
New  York  or  Chicago,  yet  the  result  in  speed  of  service  does 
not  seem  to  be  as  good. 

The  long-distant  service  in  America  is  often  referred  to  as 
much  more  prompt  than  that  given  by  the  British  Post  Office,  but 
the  general  statistics  of  the  two  services  as  a  whole  show  that 
the  average  delay  before  a  trunk  connection  can  be  obtained  in 


126  GOVERNMENT   OWNERSHIP   OF 

England  is  not  very  much  greater  than  it  is  in  America.  The 
superiority  of  the  American  service  is  principally  in  communica- 
tion between  large  centres,  and  in  this  respect  it  is  indisputable. 
The  explanation  is  simply  that  trunk  lines  between  principal  cities 
are  provided  in  America  on  a  much  more  lavish  scale  than  has 
been  done  in  this  country.  Consequently  the  American  rates  are 
high,  as  a  matter  of  fact  they  are  two  or  three  times  as  high  as 
the  British  Post  Office  charges  for  conversations  covering  the 
same  mileage.  This  is  a  very  important  point  which  should  not 
be  lost  sight  of  when  comparing  the  two  systems.  The  public 
pays  with  the  usual  American  readiness,  but  nevertheless  the 
statistics  show  that  the  trunk  service  is  relatively  much  less  used 
than  it  is  in  this  country — another  very  important  point  in  com- 
parisons of  public  utility.  The  small  man  cannot  afford  the 
luxury  of  as  much  long-distant  telephoning  as  he  can  here,  and 
the  richer  users,  who  can  afford  it,  get  the  benefit  in  promptitude 
of  service.  In  this  country,  with  its  lower  charges,  the  trunk 
lines  carry  far  more  traffic,  and  one  has  to  wait  longer  for  one's 
turn.  It  would  be  a  hard  matter  to  get  the  British  public  to 
stand  the  increase  in  the  trunk  charges  necessary  for  the  build- 
ing of  the  great  numbers  of  additional  lines  which  would  be 
required  to  bring  the  service  up  to  the  American  standard.  Each 
line  must  bring  in  an  adequate  revenue  to  pay  for  working  and 
maintaining  it  if  the  service  is  to  be  conducted  on  a  business 
footing,  and  the  problem  the  Post  Office  has  to  face  in  the 
speeding  up  of  the  trunk  service  is  not  at  all  an  easy  one.  I  may 
say  that  not  only  do  our  trunk  lines  show  a  much  smaller  pro- 
portion of  idle  time  than  those  in  America,  but  the  proportion  of 
waste  time,  that  is,  time  occupied  in  passing  calls  and  arranging 
connections,  is  also  much  lower. 

The  less  ample  provision  of  lines  in  this  country  has  forced 
the  Post  Office  to  study  very  keenly  how  to  get  the  maximum 
amount  of  traffic  over  them  in  the  busy  hours  of  the  day,  and  in 
this  respect  we  have  little  to  learn  from  America. 

The  development  of  the  "farmers'  lines"  is  a  distinctively 
American  product,  and  is  largely  due  to  the  initiative  of  the 
people  themselves,  who  had  constructed  a  great  many  lines  in  far 
outlying  country  districts  before  the  telephone  companies  had 
made  the  discovery  that  there  was  a  big  revenue  to  be  derived 
from  the  cultivation  of  such  rural  services.  Some  very  weird 


TELEGRAPH   AND   TELEPHONE  127 

productions  were  to  be  found  among  the  lines  built  by  the  farmers 
in  the  earlier  days.  An  extra  long  post  in  the  snake  fences  here 
and  there,  with  a  bit  of  fencing  wire  strung  along  on  broken 
bottle  necks  spiked  to  the  top  of  them,  to  serve  as  insulators,  was 
all  that  was  wanted  to  put  ten  or  a  dozen  farmers  into  useful 
communication  with  one  another. 

Of  the  many  things  we  saw  and  admired  in  the  telephone 
world  of  America,  there  is  none  that  impressed  me  more  than  the 
quality  of  their  organization,  the  statesmanlike  ideas  which  under- 
lie it,  and  the  hearty  way  in  which  all  appear  to  believe  in  it  and 
to  support  it.  This  organization  is  typical  to  general  American 
methods,  and  to  it  much  of  the  national  success  is  due.  Its  three 
fundamental  ideas  are  reasonable  specialization,  devolution  of 
responsibilities,  and  direct  co-operation  between  officers  whose 
work  is  associated. 

The  apparent  harmony  with  which  all  classes  work  together  in 
the  American  services  is  striking.  Two  or  three  times  I  com- 
mented on  this,  and  the  reply  in  each  case  was  to  the  same  effect — 
"Employ  high-grade  men  and  there  will  be  no  friction" — with 
which  excellent  sentiment  I  will  wind  up. 


NEGATIVE  DISCUSSION 

American  Telephone  and  Telegraph  Co. 

Governmental   and    Private  Telegraph   and   Telephone   Utilities: 
an  Analysis.     [Abridged.] 

[The  numbering  of  the  tables  in  this  abridgment  corresponds 
with  those  given  in  the  abridgment  of  Mr.  Lewis's  speech  in 
Congressional  Record.] 

[Referring  to  Lewis's  Table  5.]  That  this  comparison  is  un- 
sound and  does  not  substantiate  Mr.  Lewis'  conclusions  as  to  the 
efficiency  of  telegraph  personnel  will  be  apparent  from  the  fol- 
lowing : 

i.  The  table  is  based  on  data  which  do  not  include  all  tele- 
graph employees  in  foreign  countries.  Both  in  the  United  States 
and  in  other  countries  many  postal,  telegraph,  and  telephone 
employees  are  engaged  in  the  work  of  more  than  one  service, 
including,  in  many  instances,  railroad  service.  As  stated  above, 
no  definite  classification  of  employees  in  the  postal  services  of 
foreign  countries  exists.  Even  in  the  official  annual  reports  no 
attempt  is  made  to  allocate  "joint"  employees,  i.  e.,  such  em- 
ployees as  are  not  engaged  exclusively  in  telegraph  duties. 

For  instance,  the  annual  reports  of  the  Telegraph  Adminis- 
tration of  Belgium  do  not  distinguish  between  the  number  of 
telegraph  employees  and  the  number  of  telephone  employees; 
their  reports  do  show,  however,  that  the  number  of  employees 
in  the  Railroad,  Postal,  and  Bridges  and  Highways  Administra- 
tions, who  have  telegraph  or  telephone  duties  in  addition  to 
other  duties,  is  greater  than  the  total  number  of  employees  of 
the  Telegraph  (including  Telephone)  Administration.  These 
employees  have  been  ignored  in  Mr.  Lewis'  statistics.  Telegraph 
messengers,  of  which  there  are  about  3,600,  a  very  large  propor- 
tion of  the  total  employees,  also  do  not  appear  on  the  payroll 
of  the  Telegraph  Administration. 

In  the  case  of  Sweden,  a  letter  from  the  Telegraph  Adminis- 
tration, dated  February  18,  1913,  states  that  an  accurate  distinc- 
tion between  telegraph  employees  and  telephone  employees  "does 


130  GOVERNMENT   OWNERSHIP    OF 

not  exist."  The  Administration  states,  however,  that  on  De- 
cember 31,  1911,  there  were  at  least  3,422  telegraph  employees. 
This  is  88  per  cent  more  than  the  number  of  telegraph  employees 
quoted  for  the  same  date  in  the  source  (Journal  Telegraphique} 
from  which  Mr.  Lewis  derives  his  data. 

In  the  case  of  The  Netherlands,  Mr.  Lewis  arbitrarily  ex- 
cludes 2,078  joint  postal-telegraph  employees  in  calculating  the 
telegraph  efficiency.  If  these  joint  employees  had  been  included 
in  the  total  of  telegraph  employees,  the  number  of  telegrams  per 
annum  per  employee  in  The  Netherlands  would  have  been  less 
by  about  34  per  cent  than  that  shown  by  Mr.  Lewis. 

A  study  of  Mr.  Lewis'  statistics  as  to  telegrams  per  office 
shows  that  they  are  in  error  because,  in  the  case  of  foreign 
countries,  all  kinds  of  telegraph  offices  are  included,  whereas,  in 
the  case  of  the  United  States,  all  railroad  and  other  offices  not 
directly  operated  by  the  telegraph  companies  are  excluded.  For 
example,  in  the  case  of  Sweden,  Mr.  Lewis  has  used  statistics  of 
telegraph  offices  which  include  1,729  railroad  (1,246  private  com- 
pany) telegraph  offices,  or  60  per  cent  of  the  total.  Similarly, 
for  New  Zealand,  Mr.  Lewis  has  used  the  figure  for  telegraph 
offices  given  in  the  Journal  Telegraphique  (1,963),  but  the  An- 
nual Report  of  the  New  Zealand  Administration  for  the  same 
year  (1910)  states:  "Of  these,  300  were  telegraph  offices  and 
1,663  were  telephone  offices."  Probably  this  means  that  only  300 
were  Morse  operated  offices  (the  only  kind  used  by  Mr.  Lewis 
for  the  United  States). 

It  will  be  noted  from  these  facts  that  if  railroad  and  tele- 
phone operated  offices  in  foreign  countries  are  included  as 
telegraph  offices,  similar  offices  must  be  included  for  the  United 
States  in  any  such  comparison  if  it  is  to  be  either  fair  or  accurate. 

Not  only  is  the  operative  efficiency  of  the  American  telegraph 
systems  exceedingly  high  but  this  is  true  even  though  the  hours 
of  telegraph  office  operation  are  much  longer  in  the  United 
States  than  in  any  other  country.  This  is  evident  from  the 
following  facts  as  to  the  length  of  hours  of  telegraph  offices  in 
the  countries  named  by  Mr.  Lewis : 
[See  Table  I,  page  131.] 

The  term  "Complete  or  Prolonged  Day  Service"  is  not  de- 
fined in  the  Journal  Telegraphique,  from  which  the  above  statis- 
tics for  foreign  countries  are  derived;  but,  in  general,  "Complete 


TELEGRAPH   AND   TELEPHONE  131 
TABLE  1 

Per  cent  of  total  telegraph  offices. 

Open     Complete  or  Limited 

perman-    prolonged  day 

ently.     day  service,  service. 

New  Zealand  (1910) 0.0%             95%  5% 

Norway  (1912)    0.3                 10  89.7 

Belgium   (1912)    1.0                 26  73.0 

Sweden  (1912)    1.6                 43  55.4 

Netherlands   (1912)    0.7                 16.9  82.4 

Switzerland   (1912)    0.3                19.4  80.3 

Western  Union  Telegraph  Company: 

Open  day  and  night.. 19.3% 

Open  until  midnight  or  later 5.9% 

Open  from  10  p.  m.  to  midnight 6.4% 


Total  open  later  than  10  p.  m 31.6% 

or  Prolonged  Day  Service"  does  not  extend  beyond  10  o'clock 
p.  m.  Most  of  the  Telegraph  Administrations  do  not  give,  in 
their  annual  reports,  statistics  as  to  the  hours  of  service  of  their 
telegraph  offices.  In  the  case  of  Switzerland,  however,  full  in- 
formation of  this  character  is  given,  and  will  serve  to  indicate 
the  significance  of  the  comparison  shown  above. 

TABLE  2 
TELEGRAPH  OFFICES — SWITZERLAND,  1912 

Number  of  offices  with  continuous  service 6 

Number  of  offices  open  until  10  p.  m 17 

Number  of  offices  open  until  9  p.  m 359 

Number  of  offices  open  from  7  or  8  a.  m.  until  12  m.,  and  from 

1  p.  m.  to  8.30  p.  m 84 

Number  of  offices  open  from  7  or  8  a.  m.  until  12  m.,  and 

from  2  p.  m.  to  6  p.  m.,  and  from  8  p.  m.  to  8:30  p.  m....  1,908 


Total 2,374 

[Referring  to  Lewis's  Table  2.] 

The  significance  of  the  columns  as  to  telegraph  traffic  develop- 
ment and  mail  development  is  incorrect,  incomplete,  and  mis- 
leading, and  the  inferences  drawn  from  it  by  Mr.  Lewis  are  not 
justified  for  the  following  reasons : 

1.  The  comparison  does  not  take  into  account  differences  in 
methods  of  counting  chargeable  words. 

2.  The  comparison  does  not  include  urgent  rates  for  foreign 
countries. 

3.  The  comparison  covers  foreign  domestic  rates  only,  whereas 
the  international  service  is  more  nearly  comparable  to  that  given 
in  the  United  States. 


132  GOVERNMENT   OWNERSHIP   OF 

4.  The  comparison  of  average  receipts  per  message  is  mis- 
leading, due  to  the  duplications  in  counting  international  mes- 
sages and  the  division  of  international  telegraph  receipts. 

5.  The  comparison  does  not  take  into  account  the  differences 
in  the  hauls  of  telegraph  messages. 

6.  The  comparison  does  not  take  into  account  the  element 
of  differences  in  costs. 

7.  The  comparison  covers  only  nominal  prices  and  nominal 
receipts  per  message;  whereas  the  actual  prices  and  the  actual 
receipts  per  message  can  be  ascertained  only  by  including  revenue 
obtained  by  taxation  to  cover  telegraph  deficits. 

8.  Mail  rates  are  not  significant  in  comparisons  of  telegraph 
rates. 

Differences  in  Methods  of  Counting  Chargeable  Words 

It  is  obvious  that  no  unqualified  comparison  of  telegraph 
rates  can  be  significant  unless  the  rules  as  to  chargeable  words 
are  identical.  As  the  American  rules  are  absolutely  different 
from  the  foreign  rules  concerning  words  in  addresses  and  signa- 
tures of  telegrams,  it  is  apparent  that  Mr.  Lewis  has  not  taken 
into  account  a  factor  of  vital  importance  in  comparing  American 
with  foreign  telegraph  rates. 

The  words  of  the  address  and  signature  are  not  charged  for 
under  American  practice,  with  minor  exceptions  as  to  signa- 
tures, whereas  a  charge  is  made  for  such  words  under  European 
practice.  The  number  of  such  words  per  telegram  that  are  free 
in  the  United  States,  but  charged  for  in  Europe,  is  about  eleven 
by  the  American  counting  rules,  and  about  ten  by  the  European 
rules.  Although  it  is  true  that  the  actual  average  number  of 
words  in  the  address  and  signature  is  much  less  in  Europe  than 
in  the  United  States,  it  is  noteworthy  that  the  American  method 
is  distinctly  a  part  of  the  telegraph  service  to  patrons,  and  that 
the  European  method  forces  the  use  of  code  addresses. 

The  significance  of  the  difference  between  the  American  and 
the  European  methods  is  indicated  by  the  fees  which  the  foreign 
public  pays  for  the  registration  of  addresses.  For  example: — 

Annual  charge  for  registering 
Country.  telegraph   addresses. 

Great  Britain £  1-1     ($5.10) 

Germany M.  30     (  7.15) 

France  Fr.  40     (  7.70) 


TELEGRAPH   AND   TELEPHONE  133 

It  will  be  apparent  from  the  above  that  in  comparing  Ameri- 
can with  foreign  telegraph  rates,  some  method  of  taking  into 
account  the  differences  in  the  treatment  of  words  in  addresses 
and  signatures  must  be  secured.  Probably  the  most  accurate 
method  of  doing  this  is  to  compare  the  American  rates  for  ten 
words  of  text,  the  address  and  signature  being  free,  with  the 
foreign  rates  for  twenty  words,  on  the  assumption  that  patrons 
in  foreign  countries  will  require,  as  in  the  United  States,  an 
average  of  at  least  ten  words  for  the  address  and  signature. 
Since,  however,  the  foreign  practice  results  in  addresses  of  an 
average  of  five  words,  by  the  use  of  registered  addresses,  an 
additional  comparison  should  be  made  between  the  American 
rates  for  telegrams  of  ten  words  of  text  and  those  for  foreign 
telegrams  of  fifteen  words,  including  address,  signature  and  text. 

The  rates  quoted  by  Mr.  Lewis  for  foreign  countries  are  for 
"ordinary,"  not  "preferred,"  telegrams,  whereas  the  rates  quoted 
for  the  United  States  are  for  regular  day  messages — a  prompt 
service  equal  to  the  foreign  "urgent"  or  "preferred"  service.  It 
should  be  noted  that,  as  to  the  United  States,  Mr.  Lewis  has 
made  no  reference  to :  (a)  day  letters  (a  non-urgent  day  tele- 
gram subject  only  to  the  priority  of  day  messages)  ;  (b)  the 
night  message,  which  is  a  reduced  rate  for  night  service;  and 
(c)  the  night  letter,  a  deferred  night  message. 

It  is  not  intended  to  imply  that  the  American  deferred  serv- 
ices are  exactly  comparable  with  the  European  deferred  services, 
or  that  the  preferred  service  in  the  United  States  and  Europe  are 
exactly  comparable.  Nevertheless,  the  mere  existence  of  an 
urgent  rate  in  Europe  indicates  that  a  high  charge  must  be  paid 
to  secure  the  kind  of  service  which  the  American  systems  are 
equipped  to  handle  as  a  matter  of  course.  Hence,  it  is  true  that 
Mr.  Lewis  should  have  compared  the  European  "preferred"  rates 
with  the  American  day  message  rates,  at  least  in  addition  to 
using  the  European  ordinary  rates. 

The  following  table  has  been  prepared  to  remedy  some  of  the 
omissions  of  Mr.  Lewis'  Table  [No.  2].  In  preparing  this  table, 
the  rates  shown  for  foreign  countries  are  for  ten  words  of  text, 
which  are  allowed  under  the  American  minimum  rates,  plus  ten 
words  of  address  and  signature,  the  average  used  in  the  United 
States  by  European  count,  and  charged  for  in  Europe;  and 
also  for  ten  words  of  text  plus  five  words  of  address  and  signa- 
ture, the  probable  actual  average  in  Europe: 

12 


134  GOVERNMENT   OWNERSHIP    OF 

TABLE  3 

TABLE  OF  COMPARATIVE  TELEGRAPH  RATES  FOR  TELEGRAMS  WITH 
TEN  WORDS  OF  TEXT.    DOMESTIC  RATES  ONLY. 


f( 

ad 
a 
Country.           10 
Luxemburg  $ 
France 

Ordinary  rates 
3r  10  words  of  text 
dress   and   signature 
ssumed  to  average: 
words.        5  words. 
0.136                  $0.102 
.193                      .145 
.268                      .201 
.116                      .096 
.141                      .121 
.268                      .201 
.20                        .15 
.20                        .131 
.154                      .15 
.238                      .179 
.212                      .164 
.268                      .201 
.244                     .183 
.25                       .25 
.30                       .30 

Preferred  rates 
for  10  words  of  text 
address   and   signature 
assumed  to  average: 
10  words.            5  words. 
$0.407                 $0.307 
No  urgent  rate 
.804                     .603 
.232                     .193 
.282                     .242 
.804                      .603 
.40                       .30 
No  urgent  rate 
No  urgent  rate 
.714                     .536 
.637                     .492 
.804                     .603 
.731                     .549 
.25                       .25 
.30                       .30 

Norway                     .  . 

Belgurn     .                .    . 

Netherlands  
Sweden 

New  Zealand  
Great  Britain  
Switzerland             .  . 

Germany 

Italy 

Denmark 

Austria 

United  States 

United  States.., 

Rates  in  the  United  States  higher  than  30  cents  are  not  shown, 
as  they  apply  to  distances  greater  than  ordinarily  obtain  under 
the  foreign  domestic  rates. 

It  will  be  observed  from  this  table  that  the  foreign  ordinary 
rates  in  many  cases  approximate  the  American  rates ;  and  that 
the  foreign  urgent  rates  are  from  two  to  three  times  the  Ameri- 
can rates  in  several  instances,  and  are  lower,  even  assuming  an 
average  of  five  words  in  address  and  signature,  in  only  two  cases. 

Mr.  Lewis'  Table  [No.  2]  is  misleading  and  incomplete,  not 
only  because  of  the  omission  of  "urgent"  rates  in  foreign  coun- 
tries, but  also  because  he  has  included  only  the  domestic  (i.  e., 
internal)  rates  for  European  countries.  His  failure  to  include 
international  rates  is  a  matter  of  great  importance,  because  of 
the  very  small  size  of  the  European  countries,  as  compared  with 
the  United  States,  and  because  of  the  short  hauls  which  Euro- 
pean domestic  rates  cover.  For  example,  a  telegram  passing 
from  France  to  Sweden  (via  Germany)  is  counted  as  a  message 
in  France,  in  Germany  and  in  Sweden;  and  the  total  revenue 
therefrom  (for  transmission  between  the  offices  of  receipt  and 
destination)  is  divided  between  these  countries  in  about  the  fol- 
lowing proportions:  France  36  per  cent;  Germany  28  per  cent; 
and  Sweden  36  per  cent.  The  ordinary  (i.  e.,  non-urgent)  rate 
from  Paris  to  Stockholm  for  15  words  (including  average  of  five 
for  address  and  signature)  is  $.724,  for  a  distance  of  about  1,000 


TELEGRAPH   AND   TELEPHONE  135 

miles.  The  rate  from  New  York  to  Chicago  for  10  words  of 
text  (address  and  signature  not  charged  for)  is  50  cents  for 
about  the  same  distance.  In  Mr.  Lewis'  statistics,  one 'message 
from  Paris  to  Stockholm  is  counted  as  three,  at  an  average  of 
about  25  cents  each;  but  the  message  from  New  York  to  Chi- 
cago will  be  included  as  one  message,  at  50  cents.  Similarly, 
the  rate  for  a  message  of  15  words  (including  five  for  address 
and  signature)  from  Paris  to  Vienna,  a  distance  of  from  600 
to  700  miles,  is  $.579.  In  Mr.  Lewis'  table  such  a  message  would 
be  treated  as  three  messages  (via  Germany),  at  an  average  of 
$.193  each. 

European  international  rates  are  higher  than  the  American 
rates  for  similar  distances.  As  to  domestic  rates,  however,  the 
element  of  length  of  haul  is  a  vital  one,  to  which  no  attention 
is  called  by  Mr.  Lewis.  The  longer  average  hauls  in  the  United 
States  would  naturally  make  rates  and  revenues  per  message 
higher  than  the  respective  domestic  rates  and  domestic  revenues 
per  domestic  message  in  Europe.  This,  combined  with  .the  facts 
that  the  traffic  is  naturally  short  haul  in  Europe,  and  that  tele- 
graph traffic  is  naturally  long  haul  in  the  United  States  (due 
largely  to  higher  telephone  development),  shows  that  the  condi- 
tions are  so  essentially  different,  as  to  make  the  comparisons 
of  American  average  revenues  per  message  with  European 
averages,  without  significance. 

The  importance  of  the  factor  of  lengths  of  hauls  is  clearly 
indicated  by  the  following: 

(a)  Comparative  Areas  and  Distances  in  Foreign  Countries 

and  in  the  United  States. 
[See  Table  4,  page  136.] 

(b)  Significant  Comparisons. 

The  average  length  of  haul  for  Western  Union  telegrams  is 
about  570  miles  and  therefore  exceeds  the  maximum  possible  (not 
the  average)  haul  in  Belgium,  Denmark,  Luxemburg,  Netherlands 
and  Switzerland,  the  domestic  rates  of  which  Mr.  Lewis  compares 
with  those  of  the  United  States. 

The  average  length  of  haul  on  Western  Union  night  letters  is 
1,025  miles  and  exceeds  the  maximum  possible  domestic  haul 
(i.  e.  air-line  distance)  in  the  principal  countries  the  rates  of 
which  are  used  by  Mr.  Lewis ;  and  the  average  haul  on  American 
night  letters  is  nearly  twice  the  average  distance  between  the 
largest  47  cities  in  western  Europe  (600  miles). 


136 


GOVERNMENT   OWNERSHIP    OF 


The  average  haul  on  domestic  commercial  telegrams  in  Bel- 
gium is  officially  stated  to  be  42.5  miles.  According  to  the  Jour- 
nal Telegraphique,  domestic  messages  constitute  about  66  per 
cent  of  the  total  originating  commercial  messages  in  Belgium. 
Less  than  5  per  cent  of  the  Western  Union  traffic  is  for  hauls 
of  40  miles  or  less. 

TABLE  4 


Country. 

United   States 

New   Zealand 

Austria    

Belgium   

Denmark    

France    

German  Empire 

Great    Britain 

Hungary    

Italy    

Luxemburg 

Netherlands   

Norway    

Sweden  

Switzerland    . 


Approx. 
area  in  Sq. 

miles. 

3,026,789 

104,751 

115,800 

11,400 

14,800 
207,000 
208,800 
121,400 
125,600 
110,700 
998 

12,600 
124,100 
172,900 

16,000 


*fr 

Per    cent 

Approx. 

distance 

Per  cent 

maximum 

maximum 

of  U.  S. 

air  line 

air  line 

area. 

dimension. 

to  U.  S. 

100.0 

3,000 

100.0 

3.5 

800 

29.4 

3.8 

800* 

26.6* 

.4 

170 

5.7 

.5 

250 

8.3 

6.8 

700 

23.3 

6.9 

900 

30.0 

4.0 

770 

25.6 

4.1 

800* 

26.6* 

3.7 

730 

24.3 

, 

50 

1.7 

.4 

210 

7.0 

4.1 

1,000 

33.3 

5.7 

960 

32.0 

.5 

200 

6.7 

t  distance 

of  Austria  and  Hungary 

*  This  is  the  maximum  east  and  west  distance 
combined. 

More  than  90  per  cent  of  the  telegraph  traffic  originating  in 
Great  Britain  is  domestic.  The  mean  distance  between  the  larg- 
est cities  in  Great  Britain  is  about  150  miles.  More  than  50  per 
cent  of  the  business  of  the  Western  Union  Company  exceeds 

200  miles. 

TABLE  5 


TELEGRAPH  DEFICITS 


Country. 

Austria 

Belgium 

Denmark 

Fran 

Gerrr 

Grea 

Italy 

Hungary 

Netherlands. 

Norway 

Sweden 

Switzerland. 

Australia 

New  Zealand 


Deficit 


ce  

$1  880  000 

lany  

3  500,000 

t  Britain         .  .         

4  653  771 

671,431 


799,206 
313,212 


Per  cent 
deficit  to 
revenue 


62* 


*  Netherlands  makes  a  serious  attempt  to  treat  the  accounts  of  the 
postal  services  on  a  commercial  basis  as  a  matter  of  permanent  practice. 
In  Australia,  the  figures  were  prepared  by  special  investigation, 


TELEGRAPH   AND   TELEPHONE  137 

[From  Appendix  D.] 

Austria 

No  information  is  available  as  to  the  financial  results  of  either 
the  telegraph  or  the  telephone  service,  but  the  combined  postal, 
telegraph,  and  telephone  services  produced  (1912)  a  deficit  of 
about  $500,000.  As  the  postal  service  is  generally  conceded  to 
be  profitable  in  Europe,  it  is  very  probable  that  this  deficit  re- 
sults from  telegraph  or  telephone  operation,  or  both,  on  which, 
therefore,  the  deficit  is  probably  greater  than  $500,000. 

Denmark 

From  1876-77  until  1902-03,  the  combined  telegraph  and  tele- 
phone services  showed  annual  deficits,  but  since  that  date  the 
published  receipts  have  exceeded  the  published  expenses  by  about 
15  per  cent.  In  reply  to  an  inquiry,  however,  the  Administration 
explains  that  no  charges  for  interest  or  depreciation  are  included 
in  the  published  expenses,  so  that  the  published  profit  is  fictitious. 
It  is  significant  that  the  net  result  of  the  telegraph  and  telephone 
operations  from  1876  to  1911,  even  without  allowing  for  interest 
or  depreciation,  was  a  loss  of  about  $395,000. 

Sweden 

From  Report  of  Walter  F.  Burgess  to  Chicago  City  Council, 
April,  1907: 

The  manner  in  which  the  figures  of  the  (Telegraph  and  Telephone) 
Department  are  presented,  and  the  padding  of  the  "assets"  is  an  excellent 
example  of  the  way  in  which  the  figures  of  many  of  the  continental  Tele- 
phone and  Telegraph  Departments  are  presented  and  there  can  be  no 
doubt  that  if  the  Telegraph  and  Telephone  Department  made  proper 
allowance  for  depreciation  upon  its  property  and  was  obliged  to  create  a 
sinking  fund  and  pay  interest  for  all  moneys  which  it  has  obtained  at 
different  times,  the  alleged  profit  which  it  shows  at  the  present  time  would 
be  converted  into  a  deficit. 

Mr.  Lewis  makes  much  of  the  assumption  that  telegraph  rates 
in  the  United  States  have  not  been  reduced  since  1888,  as  show- 
ing how  absence  of  the  "public  service  motive,"  even  with  com- 
petition, affects  rates ;  but  Mr.  Lewis  is  seriously  in  error  even  as 
to  the  facts  concerning  his  own  country.  The  facts  are  as  fol- 
lows: 

During  the  past  25  years  rates  in  the  western  and  southern 
parts  of  the  United  States  (including  eastern  rates  to  the  west 
and  south)  have  been  substantially  reduced,  and  the  tendency 


138  GOVERNMENT   OWNERSHIP    OF 

for  all  rates  has  been  downward, — without  reference  to  the  in- 
troduction of  night  letters  (adopted  March  i,  1910)  and  day 
letters  (adopted  March  I,  1911).  In  fact  as  recently  as  July  i, 
1912,  the  Western  Union  Telegraph  Company  made  substantial 
reductions  in  5,000,000  to  6,000,000  rates. 

Mr.  Lewis  insists  that  the  mail,  telegraph,  and  telephone 
services  are  more  or  less  interdependent;  and  it  has  been  indi- 
cated hereinbefore  that  the  short  haul  telegraph  service  has  been 
supplanted  in  the  United  States  by  telephone  service.  Mr.  Lewis, 
moreover,  admits  that  in  Europe  the  telephone  was  taken  over  by 
the  government  largely  to  protect  the  telegraph  revenues,  which 
can  only  be  understood  as  indicating  that  the  original  policy 
was  to  restrict  the  telephone  so  far  as  necessary  to  prevent  loss 
in  telegraph  traffic.  That  this  has  been  the  case  is  shown  rather 
clearly  by  the  fact  that  in  Luxemburg,  which  has  a  maximum  haul 
of  only  50  miles,  about  20  per  cent  of  the  total  originating  com- 
mercial telegraph  messages. are  domestic,  and,  therefore,  of  the 
character  which  in  this  country  are  ordinarily  sent  by  telephone. 
Hence,  no  comparison  of  telegraph  traffic  development  is,  in 
itself,  significant  unless  accompanied  by  telephone  traffic  develop- 
ment statistics;  and,  to  be  fully  significant,  mail  development 

TABLE  6 

FIRST-CLASS    MAIL,    TELEGRAPH,    AND    TELEPHONE    TRAFFIC    PER 
INHABITANT,  YEAR  1912 

Population                   Traffic  per  inhabitant, 
in  thous-  Tele-  Tele- 
Country,  ands.  Mail.  grams,    phone.  Total. 

Austria 29,056  56.5  .50  12.55  69.55 

Belgium 7,570  50.8  .82  18.23  63.85 

Denmark 2,790  58.7  .62  81.24  140.56 

France  (1911) 39,601  43.5(1912)         1.15  8.36  53.01 

Germany 66,640  81.8  .75  34.89  117.44 

Great  Britain 46,122  91.0  1.77  23.81  116.58 

Hungary 21,213  28.5  .48  9.59  38.57 

Italy 34,890  21.6  .63  9.93  32.16 

Luxemburg 265  82.6  .57  18.45  101.62 

Netherlands 6,078  49.3  .76  27.92  77.98 

Norway 2,422  39.6  1.23  70.00  110.83 

Sweden 5,604  35.6  .49  77.47  113.56 

Switzerland..        ...  3,841  98.1  .83  17.85  116.78 

United  States 96,299  106.0  1.05*  161.99  269.04 

*  Estimated  for  all  telegraph  companies  in  the  United  States,  less  10 
per  cent  to  compensate  for  duplications  and  errors. 

Telegraph  messages  do  not  include  inward  international  messages; 
transit  international  messages;  or  service  messages.  Ten  per  cent  deducted 
from  American  telegraph  statistics  to  avoid  duplications. 


TELEGRAPH   AND   TELEPHONE  139 

(first-class)  should  also  be  included.  For  these  reasons,  mail 
and  telephone  traffic  development  statistics  are  shown,  together 
with  the  telegraph  traffic  statistics,  in  Table  6,  page  138. 

[Table  7  gives  the  rank  of  each  country  as  to  mail,  telegraph, 
and  telephone  traffic  development  relatively.] 

[Referring  to  Lewis'  Table  6.] 

1.  Mr.  Lewis  has  included  all  classes  of  telegraph  offices  for 
foreign  countries,  but  has  excluded  railroad  and  telephone  tele- 
graph offices  for  the  United  States.     The  percentage  of  railroad 
telegraph   offices  to   total  telegraph   offices  in   some  countries   is 
greater  than  in  the  United   States,  as  shown  by  the   following 
table  :— 

TABLE  8 

Per  cent  of  railway 
telegraph  offices  (for 
commercial  business) 

to  total  telegraph 
Country.  offices    1912. 

Germany 13 

Austria 33 

Belgium 2 

Denmark 68 

Hungary 48 

Italy 24 

Norway 26 

Great  Britain 60 

Netherlands 3 

Sweden 17 

Switzerland 21 

Russia 49 

France 16 

Western  Union,  about 53  (Nov.  30,  1913) 

It  appears  from  the  above  that  the  European  governments 
use  railway  offices  very  largely  for  telegraph  purposes,  although 
the  density  of  population  in  most  cases  is  much  greater  than  in 
this  country ;  and  that  in  Denmark,  Sweden,  Russia  and  Hungary, 
the  percentage  of  railway  offices  exceeds  or  approaches  the  West- 
ern Union  percentage. 

2.  Mr.  Lewis  has  excluded  the  various  telephone  offices  used 
for  telegraph  purposes  for  the  United  States,  but  has  included 
such  offices  for  foreign  countries. 

3.  In  eliminating  all  offices  except  directly  operated  Morse 
offices  for  the  United  States,  Mr.  Lewis  infers  that  the  service 
from  the  offices  excluded  is  inferior.    The  facts  concerning  delays 
in  transmission  in  various  types  of  foreign  telegraph  offices  are 
not  available ;  but  so  far  as  the  adequacy  of  facilities  to  the  pub- 


140  GOVERNMENT   OWNERSHIP    OF 

lie  is  concerned,  the  length  of  hours  of  telegraph  offices  is  a  very 
significant  factor  which  Mr.  Lewis  has  overlooked. 

Mr.  Lewis,  however,  believes  that  the  assumed  inadequacy 
of  telegraph  facilities  in  the  United  States  is  attributable  to  the 
lack  of  the  "public  service  motive."  In  this  connection  it  is 
pertinent  to  note  that  in  Great  Britain,  at  least,  many  Post  Office 
telegraph  offices  are  maintained  by  local  community  or  personal 
guarantees,  "under  which  the  guarantors  agree  for  a  term  of 
seven  years  to  pay  one-third  of  any  sum  whereby  the  telegraph 
receipts  may  fall  short  of  the  annual  cost  of  maintenance."  The 
latest  statistics  indicate  that  there  were  900  such  offices  in  Great 
Britain  in  1913,  and  that  65  per  cent  of  the  telegraph  offices  added 
during  the  year  were  opened  on  this  basis.  A  similar  practice 
is  in  effect  in  Switzerland. 

Mr.  Lewis  should  have  included  all  telegraph  offices  in  the 
United  States,  regardless  of  the  method  of  operation  or  the 
financial  basis  on  which  they  are  conducted.  Mr.  Lewis  states 
the  number  of  post  offices  and  branches  as  64,022,  and,  although 
this  includes  post  offices  in  Alaska,  Hawaii,  etc.,  where  the 
American  land  line  companies  do  not  operate,  this  figure  may  be 
used.  The  number  of  Western  Union  Offices  on  October  31, 
1913,  was  36,491.  Estimating  the  number  of  telegraph  offices  of 
other  telegraph  companies  at  5,000,  there  are,  say,  42,000  telegraph 
offices  in  the  United  States;  or  i  telegraph  office  to  1.52  post 
offices,  against  I  telegraph  office  to  7.7  post  offices,  according  to 
Mr.  Lewis.  The  fact  is  that,  in  relation  to  post  offices,  there  are 
more  telegraph  offices  in  the  United  States  than  in  Great  Britain, 
Japan,  Switzerland,  Russia,  Norway,  Austria,  Denmark,  or  Au- 
stralia (the  latter  is  I  to  1.8;  not  shown  by  Mr.  Lewis). 

From  the  above  it  is  clear  that,  in  spite  of  the  area  covered 
and  the  high  development  of  telephone  facilities  in  the  United 
States,  its  telegraph  facilities  are  not  restricted ;  and  are,  in  fact, 
better  than  in  many  of  the  most  important  countries  referred  to 
by  Mr.  Lewis. 

Summary  as  to  Telegraphs 

Mr.  Lewis'  propositions  concerning  telegraphs  were :  that  the 
institutional  efficiency  of  private  telegraph  systems  was  relatively 
low;  that  their  rates  were  relatively  high;  and  that  the  develop- 
ment of  their  service  was  relatively  low.  These  propositions  he 
attempted  to  prove  by  various  assumptions  which  were  erroneous. 


TELEGRAPH   AND   TELEPHONE  141 

In  rebutting  his  assumptions  and  conclusions,  it  has  been  shown : 

1.  That  high  efficiency  in  the  United  States  Post  Office  has 
not  been  demonstrated. 

2.  That  the  efficiency  of  the  private  telegraph  organizations 
is  not  relatively  low,  but  relatively  high. 

3.  That  the  theoretical  savings  in  routine  operations  under 
postalization  could  be  secured  only  "by  curtailment  of  service. 

4.  That  the  theoretical  savings  in  administration  of  telegraphs 
under  postalization  could  not  be  effected,  and  are  not  effected 
when  governments  operate  the  telegraph. 

5.  That  the  theoretical  savings  in  rent  under  postalization  are 
small  and  doubtful  of  actual  accomplishment  in  practice. 

6.  That  rates  of  private  companies  are  not  high  as  compared 
with  domestic  foreign  rates  as  a  whole  for  similar  service. 

7.  That  rates  of  private  companies  are  lower  than  those  of 
governments  for  similar  service  on  international  lines. 

8.  That  private  companies  have  reduced  their  rates  consid- 
erably during  recent  years,  a  fact  which  escaped  Mr.  Lewis'  ob- 
servation. 

9.  That  government   rates,  though   not   lower   than   private 
rates,  result  in  heavy  deficits. 

10.  That    the    telegraph    traffic    development   in    the    United 
States  is  high,  and,  in  view  of  the  great  telephone  development 
in  the  United  States,  is  exceedingly  high. 

As  to  the  Inefficiency  of  Private  Telephone  Systems 

[Referring  to  Lewis's  Table  18.] 

i.  Mr.  Lewis  apparently  derived  his  statistics  of  telephone 
efficiency  from  the  Journal  Telegraphique.  A  study  of  the  data 
which  he  used  shows  that  he  neglected  the  fact  that  the  figures 
on  the  "total  number  of  employees"  given  in  that  source  are  gen- 
erally qualified  in  explanatory  notes,  and  that  those  qualifications 
render  the  figures  absolutely  unsuitable  for  Mr.  Lewis'  purpose; 
for  to  show  "telephone  operative  efficiency,"  the  whole  number  of 
telephone  employees  must  be  considered,  as  Mr.  Lewis  admits 
by  his  assertion  that  "all  kinds  of  employees  of  the  telephone  and 
post  are  included  in  the  statement." 

The  following  are  the  facts  concerning  Mr.  Lewis'  errors  in 
this  respect. 

Norway — State  System.     The  long  distance   staff  is   largely 


142  GOVERNMENT   OWNERSHIP   OF 

joint  telephone-telegraph.  Statistics  used  by  Mr.  Lewis  include 
only  exclusively  telephone  employees;  and  hence  also  do  not  in- 
clude executive  officers  and  staffs. 

Belgium.  Joint  telephone-telegraph  employees  are  not  in- 
cluded in  the  statistics  used  by  Mr.  Lewis. 

Sweden.  The  statistics  used  by  Mr.  Lewis  exclude  all  tele- 
phone plant  employees,  accounting  employees  and  all  employees  of 
the  executive  department. 

Switzerland.  The  statistics  used  by  Mr.  Lewis  exclude  24 
apprentice  operators,  647  operators  who  have  other  work  in  addi- 
tion to  telephone  duties,  and  222  auxiliary  operators. 

France.  Mr.  Lewis'  statistics  include  only  such  employees  as 
devote  their  entire  time  to  telephone  work. 

Italy.  The  actual  computation  for  Italy,  from  statistics  in 
the  Journal  Telegraphique,  gives  an  efficiency  of  38,490  calls 
per  employee  (1910)  as  against  67,727  per  employee  quoted  by 
Mr.  Lewis. 

Netherlands.  The  statistics  used  by  Mr.  Lewis  include  opera- 
tors only. 

Bell  Companies.  The  efficiency  of  the  Bell  organization,  in- 
cluding all  employees,  and  equated  by  Mr.  Lewis'  method,  was 
72,000  calls  per  employee  in  1912,  as  against  58,134  quoted  by 
Mr.  Lewis. 

It  will  be  apparent  from  the  above,  even  assuming  that  Mr. 
Lewis'  method  and  his  data  as  to  traffic  are  correct,  that  the  "tel- 
ephone operative  efficiency"  of  the  foreign  countries  named  above 
is  far  below  that  shown  in  Table  No.  18. 

2.  Mr.  Lewis'  statistics  of  conversations  are  widely  in  error, 
due  to  his  assumption  that  one  toll  or  long  distance  conversa- 
tion is  equal  to  four  local  conversations.  No  broad  equation 
of  toll  traffic  in  this  manner  is  possible.  For  example:  The 
amount  of  operating  work  involved  in  a  long  haul  toll  conversa- 
tion is  ordinarily  much  greater  than  for  a  short  haul  toll  mes- 
sage. Again,  the  amount  of  labor  involved  depends  upon  whether 
there  is  a  direct  circuit  between  the  terminating  points,  or 
whether  it  is  necessary  to  engage  the  time  of  several  operators 
in  "building  up"  the  circuit  desired.  Moreover,  there  is  a  very 
great  difference  in  the  kinds  of  toll  calls.  In  the  case  of  one 
class  of  toll  calls,  the  operators  have  to  secure  the  particular 
person  desired  before  the  conversation  can  begin.  In  a  second 


TELEGRAPH   AND   TELEPHONE  143 

class  of  toll  calls,  the  subscriber  must  himself  secure  the  per- 
son after  the  connection  is  established,  or,  if  the  person  is  not 
there,  must  give  his  instructions  to  \vhoever  answers  at  that 
telephone. 

The  figure  for  interurban  conversations  given  in  the  Journal 
Telegraphique  for  Belgium  is  1,816,793  (1910).  This  agrees 
with  the  statistics  given  in  the  Annual  Report  of  the  Belgian 
Telegraph  Administration,  where  it  is  shown,  however,  that  this 
total  includes  464,044  international  messages  including  both  in- 
coining  and  outgoing  messages. 

It  will  be  apparent  that  the  amount  of  this  duplication  in  most 
European  countries  is  considerable,  as  in  the  case  of  telegraph 
messages ;  and  that  it  results  in  a  very  serious  inflation  of  the 
"units"  per  employee  in  Mr.  Lewis'  "efficiency"  statistics,  where 
a  single  toll  conversation  is  counted  as  four  "units." 

(b)  In  most  countries  the  unit  period  of  toll  conversation  is, 
as  Mr.  Lewis  shows,  three  minutes.  In  most  European  countries, 
however,  each  three  minutes  or  fraction  thereof  of  an  actual 
conversation  is  counted,  for  statistical  purposes,  as  a  separate 
conversation.  This  is  not  the  American  practice,  so  that  Mr. 
Lewis'  statistics  for  foreign  countries  are  again  inflated.  This 
statement  needs  no  further  substantiation  than  a  quotation  from 
the  instructions  of  the  International  Telegraph  Bureau,  accom- 
panying the  form  on  which  the  statistical  returns  are  made  by 
the  various  governments  for  publication  in  the  Journal  Tele- 
graphique.' The  instruction  is  as  follows: — 

(Translation)  Each  interurban  conversation  is  counted  as  a  unit,  in- 
dependently of  the  number  of  central  offices  through  which  it  passes,  if  it 
is  completed  within  the  unit  period  of  time  authorized  under  the  rate  sys- 
tem used.  If  it  (the  conversation)  extends  beyond  this  period,  it  is  counted 
as  many  times  as  there  are  rate  periods. 

In  the  United  States  from  25  per  cent  to  more  than  50  per 
cent  of  the  toll  conversations  extend  beyond  three  minutes,  and 
from  3  per  cent  to  10  per  cent  extend  beyond  six  minutes,  vary- 
ing with  the  length  of  haul;  but  each  message,  regardless  of 
duration,  is  counted  as  one  message.  This  indicates  how  serious 
the  duplication  in  the  European  method  of  counting  is,  in  com- 
parison with  toll  traffic  in  the  United  States.  In  Sweden  the 
number  of  rate  units  used  is  31  per  cent  higher  than  the  number 
of  actual  conversations. 


144  GOVERNMENT   OWNERSHIP    OF 

4.  The  term  "phone  call,"  used  by  Mr.  Lewis,  is  not  denned. 
The  statistics  for  the  Bell  System  cover  completed  conversations 
or  messages  only;  but  it  is  possible  that  those  for  foreign  coun- 
tries include  attempted  calls,  since  the  record  of  completed  con- 
versations is  obtained  only  by  deducting  from  this  total  of  calls, 
completed  and  attempted,  the  percentage,  determined  by  careful 
observations,  of  calls  not  completed  because:  (a)  the  called  sub- 
scriber does  not  answer ;  (b)  the  called  subscriber's  line  is  busy ; 
etc.  Hence,  the  statistics  for  the  Bell  System  are  compiled  under 
the  most  restrictive  definition — in  fact,  a  much  broader  definition 
is  used  for  routine  administrative  purposes  in  determining  the 
efficiency  of  operation.  The  significance  of  this  statement  is 
indicated  by  the  fact  that  the  Census  Bureau  in  quoting  statistics 
of  telephone  conversations  in  the  United  States  for  1912  (in  pub- 
lished advance  sheets)  states  in  a  note  that  those  for  the  Bell 
Companies  include  only  completed  conversations  whereas  those 
for  other  companies  probably  include  uncompleted  conversations 
in  addition.  In  view  of  these  facts,  and  in  the  absence  of  specific 
information  to  the  contrary,  it  is  pertinent  to  question  whether 
or  not  the  foreign  statistics  are  comparable  with  those  used  for 
the  Bell  System. 

Under  government  systems,  there  is  not  given  the  broad,  full 
service  which  would  secure  the  highest  utilization  of  the  system 
on  which  Mr.  Lewis  lays  so  much  stress,  although,  possibly, 
their  practice  of  limiting  hours  of  service  very  largely  to  the 
daylight,  period  may  assure  full  loads  for  operators-  while  on 
duty.  Even  under  these  conditions,  the  evidence  makes  it  clear 
that  the  number  of  calls  per  employee  in  the  Bell  System  is  much 
greater  than  in  any  other  country. 

However,  there  are  other  facts  available  which  are  more 
indicative  of  the  institutional  efficiency  of  the  private  systems. 
Of  these,  perhaps  the  most  significant  are  those  relating  to  the 
cost  of  plant  under  government-  ownership ;  for  if  it  costs  a  gov- 
ernment more  per  unit  to  build  plants,  in  spite  of  the  differences 
in  price  levels,  it  is  obvious  not  only  that  the  constructive  effi- 
ciency of  the  governments  is  inferior,  but  that  inevitably  this 
inefficiency  must  result  in  unnecessary  burdens  on  the  public, 
either  through  rates  or  through  taxation.  The  following  statis- 
tics show  the  average  investment  per  station  of  the  various  sys- 
tems. These  statistics  are  all  official,  though  not  all  published: 


TELEGRAPH   AND   TELEPHONE  145 

TABLE  10 

AVERAGE  INVESTMENT  PER  TELEPHONE 
JANUARY  i,  1913 

Average  in- 
vestment per 
Country  telephone. 

Austria $211 

Belgium 276 

France 257 

German  Empire 178 

Hungary 

Luxemburg 176 

Switzerland 190 

Australia 163 

United  States  (Bell)  * 153 

*  January  i,   1914. 

In  Norway,  Sweden,  Denmark,  Italy  and  The  Netherlands  telephones 
are  operated  under  both  private  and  public  management;  but,  inasmuch  as 
the  governments  own  the  toll  lines  but  do  not  own  all  the  telephone 
stations  using  such  lines,  and  as  the  companies  own  large  numbers  of 
stations  but  few  toll  lines,  the  investment  statistics  for  these  countries  would 
of  course  not  be  significant. 

[Referring  to  Lewis's  Table  13.] 

This  comparison  is  misleading  and  incorrect,  because: 

i.  It  is  a  comparison  of  rates  in  exchanges  having  exclusively 
unlimited  service  with  those  having  chiefly,  or  exclusively,  mes- 
sage service.  Mr.  Lewis  admits  that  such  a  comparison  does 
not  warrant  definite  conclusions,  and  for  this  reason  gives  a 
second  table  in  which  rates  in  what  purport  to  be  exclusively 
message  service  exchanges  are  compared.  However,  it  may  be 
well  to  note,  in  connection  with  Table  [No.  13]  that  flat  rates 
are  quoted  exclusively  only  in  The  Hague,  Tokio,  Auckland, 
Amsterdam,  Rotterdam,  Budapest,  and  Paris ;  and  that  in  none 
of  the  cities  named  are  the  Bell  Company  rates  exclusively  flat 
rates. 

2,.  The  rates  compared  are  maximum  rates,  whereas  in  most 
flat  rate  cities  not  more  than  10  per  cent  of  the  subscribers  pay 
maximum  rates,  and  in  message  rate  exchanges  less  than  i  per 
cent  pay  the  maximum  quoted  charge,  excluding  Private  Branch 
Exchange  subscribers. 

3.  A  comparison  of  minimum  rates  would  be  more  significant 
because,  in  many  cases,  the  minimum  rate  is  used  by  the  plurality 
of  subscribers,  and  because  it  indicates  the  availability  of  the 
service.  Whereas  the  mean  maximum  American  rate  is  $133.02 


146  GOVERNMENT   OWNERSHIP    OF 

and  the  mean  maximum  rate  in  the  foreign  cities  is  $43.46  (as 
shown  by  Mr.  Lewis),  the  mean  minimum  rate  in  the  American 
cities  is  $23.17  as  against  the  mean  foreign  minimum  rate  of 
$28.80.  The  minimum  rate  of  the  American  cities  includes  at 
least  365  messages  per  annum,  whereas  in  two  of  the  European 
cities  [Stockholm  and  Copenhagen],  the  minimum  rate  includes 
no  outward  service. 

4.  The   statement  that  the   Chicago   rate  has   recently  been 
increased  to  $125,  "competition  presumably  removed,"  is  incor- 
rect.   The  rate  of  $84  is  a  flat  rate  of  the  independent  company 
still   operating;    and   the  $125    rate   of    the    Chicago   Telephone 
Company  has  been  in  effect  for  many  years,  and  was  author- 
ized    by     the     Chicago     City     Council     after     complete     public 
investigation  in  1907.     Under  the  Chicago  telephone  rate  ordi- 
nance of  1913,  this  flat  rate  of  $125  was  abolished  as  to  all  new 
subscribers,  and  in  its  stead  a  rate  of  approximately  $125   for 
not  more   than   6,000  messages   was   established.     It   should   be 
noted  that  no  change  in  rates  in  Chicago  has  ever  been  made 
as  a  result  of  competition.     It  is  also  important  to  note  that 
the   rate   of   $84   is   the   only    rate    quoted   by   the    independent 
company  for  business  service,  and  that  more  than  60%  of  the 
Chicago    Bell    business    subscribers    [not   including   private    ex- 
change  subscribers]    pay   less   than   the   independent   company's 
minimum  business  rate. 

5.  Mr.  Lewis'  Table  [No.  13]  consists  of  a  list  of  cities  not 
selected    with    regard    to    size,    population,    or    the    number    of 
telephones.     It  is  a  matter  of  general  knowledge  that  rates  in 
large  exchanges  must  be  higher  than  in  small  exchanges.     For 
example,  the  rates  of  the  Post  Office  in  London  are  higher  than 
in  the  provinces;  the  rates  in  Berlin  are  higher  than  in  other 
German  exchanges;  the  rates  in  Paris  are  higher  than  in  other 
cities  in  France. 

6.  A    comparison    of    the    rates    in    the    foreign    exchanges, 
named  by  Mr.  Lewis,  having  unlimited  service  exclusively,  with 
those    in    the   United    States    of    similar    size    having    unlimited 
service  exclusively,  shows  that  the  foreign  rates  are  higher. 

[Table  n  gives  comparison  of  rates  in  exclusively  flat  rate 
exchange.] 

[Referring  to  Table   14]  : 

When   both   flat   rates   and   message   rates   are   quoted,   Mr. 


TELEGRAPH   AND   TELEPHONE  147 

Lewis  uses  whichever  is  the  cheaper  in  computing  his  statistics 
for  foreign  cities  (for  example,  in  Berlin)  ;  but  in  preparing 
his  statistics  for  some  American  cities  (Boston,  Cincinnati,  and 
New  Orleans)  he  has  not  done  this. 

The  exchanges  compared  vary  so  widely  as  to  the  number 
of  telephones,  as  shown  by  the  following  table,  that  in  most  cases 
no  comparison  of  rates  could  be  significant. 

[Table  12  compares  number  of  telephones  in  cities  of  similar 
size,  United  States  and  other  countries.] 

The  rates  in  Berlin  do  not  include  night  service,  for  which  a 
special  charge  of  about  5  cents  per  night  message  is  made  both  to 
message  rate  and  flat  rate  subscribers,  in  addition  to  any  charges 
which  would  apply  on  day  messages.  A  very  large  amount  of 
traffic  is  handled  during  night  hours  in  large  American  cities, 
so  that  obviously  no  comparison  could  be  made  between  the 
Berlin  rates  and  those  of  any  American  city. 

The  comparison  relates  only  to  rates  for  individual  line 
business  service.  On  what  basis  it  is  assumed  that  a  comparison 
of  rates  for  this  class  of  service  only  is  supposed  to  be  signifi- 
cant, is  not  clear.  As  a  matter  of  fact  the  rate  for  this  service 
is  not  only  the  highest,  but  is  also,  from  the  standpoint  of  the 
public,  among  the  least  important.  Not  only  do  the  very  great 
majority  of  the  subscribers  in  Bell  exchanges  receive  service  at 
lower  rates,  but  the  great  majority  are  residence  subscribers 
who  receive  service  at  very  much  lower  rates. 

It  will  be  seen  from  the  above  that  Mr.  Lewis'  table  is  not 
significant  in  any  way.  As  a  matter  of  fact,  a  comparison  of 
this  general  type  that  covered  even  the  chief  factors  of  import- 
ance in  the  respective  rate  schedules  would  be  so  intricate  as 
not  to  permit  any  general  conclusions  therefrom. 

Of  these  facts  the  most  significant  in  relation  to  rates  are 
those  concerning  the  hours  of  service.  It  has  already  been 
shown  that  the  hours  of  telephone  operation  in  the  great 
majority  of  the  exchanges  of  New  Zealand,  Switzerland, 
Sweden,  and  Belgium  are  so  short  as  to  impose  serious  limita- 
tions on  the  emergency  value  of  telephone  service  in  all  except 
ordinary  business  hours,  and,  except  in  a  few  exchanges,  to 
limit  the  use  of  the  telephone  during  evening  and  night  hours 
and  on  Sundays  and  holidays.  Although  the  information  con- 
cerning this  factor  in  rates  and  service,  in  New  Zealand,  Swit- 


148  GOVERNMENT   OWNERSHIP    OF 

zerland,  Sweden,  and  Belgium,  will  serve  to  indicate  the  general 
conditions  of  foreign  service,  it  is  important  to  note,  for 
completeness,  that  similar  conditions  are  found  in  Austria, 
Germany,  France,  Great  Britain,  and  Australia.  This  statement 
is  based  on  the  following  general  information: 

Austria:  "As  a  rule,  the  hours  of  offices  (telephone 
exchanges)  conform  to  those  of  the  telegraph  offices.  Centrals 
with  more  than  100  main  stations  (i.  e.,  subscribers)  have  at 
least  full  day  service  (in  summer  from  7  a.  m.,  in  winter  from 
8  a.  m.,  to  9  p.  m.)"  This  statement  is  significant  in  view  of 
the  facts  that  only  1.2  per  cent  of  the  government  telegraph 
offices  are  open  all  day  and  all  night,  and  that  only  8.4  per  cent 
of  such  offices  have  complete  or  prolonged  day  service. 

Germany:  As  mentioned  above,  a  charge  is  made  in  all 
German  exchanges  for  night  telephone  calls.  Since  not  all 
exchanges  are  open  at  night,  rates  are  also  quoted  for  connect- 
ing two  subscribers'  lines  continuously  during  the  hours  when 
the  'central  offices  are  not  operated ;  or  for  giving  a  continuous 
connection  during  the  hours  when  the  subscriber's  central  office 
is  not  operated,  with  some  distant  central  office  that  will  be 
open  during  such  hours. 

In  this  connection,  it  should  be  noted  that  even  in  places  of 

30,000    inhabitants,    service    is    not    given    after    9   p.    m.,    and, 

although  the  people  complain  of  this,  the  Government  does  not 

act.      Herr    Wendel,    in   the    Reichstag    on    February    21,    1913, 

.  described  the  condition  in  the   following  words    (translation)  : 

I  cannot  forego  to  speak  here  about  the  wish  expressed  by  one  of  our 
Electoral  Districts.  I  refer  here  to  Freiburg.  There  the  entire  telephone 
service  is  interrupted  at  9  o'clock  p.  m.  Five  minutes  after  9  o'clock  it 
is  impossible  to  obtain  a  telephone  connection.  Now  the  Town  Council  of 
Freiburg  has  addressed  the  Postal  Administration  and  asked  for  the  intro- 
duction of  night  telephone  service.  The  Postal  Administration  has  refused 
the  request.  It  is  true  that  Freiburg  is  a  very  pretty,  idyllic  and  quiet 
town,  and  I  am  glad  of  it;  moreover,  the  night  is  not  man's  friend.  I 
admit  this;  but  it  must  also  be  remembered  that  not  all  citizens  of  Freiburg 
go  to  roost  with  the  chickens,  and  a  sudden  sickness,  accident,  fire — any 
kind  of  trouble — may  require  a  quick  telephone  call  for  a  physician,  or  for  a 
fire  brigade,  just  as  much  after  9  o'clock  p.  m.  as  prior  to  that  time.  It 
seems  to  me  indefensible  that  a  city  of  some  30,000  inhabitants  should 
be  deprived  of  telephone  service  at  9  p.  m.,  and  it  is  the  duty  of  the 
Postal  Administration  to  get  quickly  in  touch  with  the  Postal  Direction  of 
Freiburg  or  the  Upper  Postal  Direction  of  Dresden  in  order  that  this 
justifiable  request  of  the  inhabitants  may  be  granted. 


TELEGRAPH   AND   TELEPHONE  149 

Even  in  the  day  time,  in  many  instances,  the  German  tele- 
phone service  is  discontinued.  Kraetke,  Secretary  of  State  for 
the  Imperial  German  Post  Office,  with  referenee  to  this  inade- 
quacy of  the  German  service,  spoke  as  follows  in  the  Reichstag 
on  February  21,  1913  (translation)  : 

I  have  listened  to  the  wish  that  our  telephone  exchanges  should  also 
be  kept  open  during  the  noon  hours.  I  wish  to  state  that  the  various 
authorities  have  been  instructed  to  exert  themselves  along  this  line.  In 
accordance  with  the  reports  which  are  before  me,  I  can  state  that  70  per 
cent  of  all  our  telephone  exchanges  give  service  between  12  m.  and  i  p.  m. 
In  this  connection  it  has  also  been  stated  that  it  is  a  mistake  that  neighbor- 
ing exchanges  stop  service  at  various  noon  hours.  I  have  also  asked  the 
various  Telephone  Directions  to  consider  this  request,  as  otherwise  our 
telephone  exchanges  are  .not  as  valuable  to  the  people  as  they  might  be. 

Great  Britain:  There  are  many  exchanges  in  small  places 
which  do  not  have  continuous  day  and  night  service,  the  break 
of  service  being  from  10  p.  m.  to  4  a.  m.  or  5  a.  m. 

France:  Small  exchanges  are  closed  two  hours  at  noon, 
after  seven  o'clock  at  night,  and  after  ten  o'clock  in  the  morn- 
ing on  Sunday.  In  some  of  the  larger  places  like  Limoges 
(population  92,000)  all-night  telephone  service  is  given,  but  only 
because  the  Chamber  of  Commerce  pays  for  the  expense,  which 
it  meets  through  subscriptions  from  the  municipality,  from 
newspapers,  and  from  the  general  public.  Nimes  (population 
80,000)  has  no  telephone  service  after  midnight. 

Australia:  "Hours  of  Attendance.  When  the  revenue  from 
subscribers'  lines  and  services  connected  to  any  exchange  is  less 
than  the  rate  of  £150  per  annum,  attendance  at  that  exchange 
shall  be  given  only  during  the  hours  for  which  the  office  in 
question  is  usually  open  for  the  transaction  of  public  business. 
[Referring  to  Lewis's  Table  15.] 

i.  The  table  is  directly  mendacious  in  that  the  columns 
showing  Bell  rates  "before  competition"  and  Bell  rates  "after 
competition  wiped  out,  or  Bell  found  it  impossible  to  kill 
competition,"  are  for  the  highest  grade  of  business  service ; 
whereas  the  rates  shown  in  the  'column  "Bell  rate  during 
competition"  are  in  no  case,  except  for  Kenosha,  Wisconsin, 
rates  for  the  highest  grade  of  business  service,  but  are  in  most 
cases  for  a  lower  grade  of  residence  service;  and  in  some  cases, 
like  York,  Savannah,  and  Norfolk,  the  rate  stated  has  not  been 
quoted  for  any  kind  of  service.  The  rates  given  as  in  effect 

13 


ISO  GOVERNMENT   OWNERSHIP    OF 

before  and  after  competition  are  in  several  instances  incorrect. 
In  the  column  "before  competition"  the  rates  shown  for  Nor- 
folk and  Savannah  were  not  quoted  for  any  class  of  service, 
and  the  rate  shown  for  Winona  was  quoted  for  a  party  line 
service.  In  the  column  "after  competition  wiped  out,  etc.,"  the 
rate  shown  for  Norfolk  was  for  individual  line  flat  rate 
business  service,  while  individual  line  message  rate  business 
service  was  available  at  $24.00  less  per  annum;  the  rate  shown 
for  Savannah  was  a  residence  rate;  and  the  rate  shown  for 
Winona  was  not  quoted  for  any  class  of  service. 

2.  The  rates  of  the  following  exchanges  named  have  been 
decreased,  instead  of  increased,  after  competition  has  ceased : 

Richmond,  York  (still  competitive),  San  Jose,  Dubuque, 
Savannah,  Mobile  (still  competitive),  Lynchburg,  Oswego,  and 
Iowa  City.  Rates  have  been  increased  by  the  Bell  Company  in 
no  case,  with  the  possible  exception  of  Winona. 

3.  Such   reductions   as  have  been   made   in   rates   after   the 
introduction  of  competition  have,  in  most  cases,  been  similar  to 
those    made    at    about    the    same    period    in    non-competitive 
exchanges. 

4.  The  statistics  given  by  Mr.  Lewis  are  not  only  incorrect 
as  quoted  in  these  instances,  but  the  inferences  which  he  draws 
or  wishes  drawn  are  not  justified  in  general.     A  study  of  the 
rate  history  in  exchanges  where  former  competition  has  ceased, 
in  places  of  more  than  10,000  population,  shows  the  following: 

TABLE  13 
BELL  RATES  AFTER  CESSATION  OF  COMPETITION 

No.  of       Per  cent .  of 
Exchanges.  Exchanges. 

No  change  in  rates 47  51  ~| 

No  increase  in  rates  in  three  years 3  3    f    86 

Rates  decreased 30  32  J 

Rates  increased  within   three  years 13  14 

Total 93  100 

The  above  statistics  cover  exchanges  where  competition 
ceased  prior  to  1913.  The  total  number  of  such  exchanges  in 
place  of  more  than  10,000  population  is  .about  140,  and  those 
eliminated  in  compiling  the  above  table  were  not  used  because 
of  no  record,  incomplete  record,  Bell  exchange  sold,  or  facts 
of  doubtful  interpretation. 


TELEGRAPH   AND   TELEPHONE  151 

With  reference  to  Mr.  Lewis'  Table  [No.  16]  it  should  be 
noted : 

That  the  rates  quoted  purport  to  be  the  Bell  rates  for 
individual  line  business  service;  but  the  rates  quoted  are  not 
Bell  rates  for  such  service  in  the  following  instances :  Chicago, 
Philadelphia,  Cleveland,  Minneapolis,  New  Orleans,  Denver 
Memphis,  Dayton,  Spokane,  Trenton,  Wilmington,  Springfield, 
O.,  San  Diego,  Jackson,  Decatur,  and  Burlington. 

The  rates  compared  are  those  for  flat  rate,  mixed  flat  and 
message  rate,  and  exclusively  message  rate  exchanges.  Mr. 
Lewis  admits  that  a  comparison  of  flat  rate  and  message  rate 
schedules  is  incorrect  and  misleading. 

The  exchanges  are  apparently  compared  on  the  basis  of 
population,  not  on  the  basis  of  the  number  of  telephones  served. 

[Table  14  gives  comparative  size  of  exchanges  in  various 
American  cities.] 

In  comparing  rates  in  message  rate  cities,  the  maximum 
quoted  message  charge  is  used.  This  is  grossly  misleading,  since 
less  than  i  per  cent  of  the  subscribers  pay  the  maximum  quoted 
message  charge,  or  more,  in  any  exchange.  It  would  be  more 
significant  to  quote  the  minimum  message  charge,  since  from 
30  per  cent  to  50  per  cent  of  the  development  in  a  given  class 
of  service  is  secured  at  the  minimum  rate.  In  this  connection 
the  following  comparison  is  significant: 

[Table  15  gives  competitive  and  non-competitive  rates  for 
individual  line  business  service,  in  specified  cities.] 

Rate  schedules  can  be  considered  only  as  a  whole,  and 
specific  rates  cannot  be  compared  for  general  purposes.  The 
comparison  quoted  by  Mr.  Lewis  contemplates  the  highest  grade 
of  service  only,  whereas  the  minimum  rate  for  business,  and 
particularly  the  minimum  rate  for  residence  service,  are  more 
important.  The  error  of  Mr.  Lewis'  comparison  in  this  respect 
is  shown  by  the  following: 

[Table  16  gives  minimum  rates  in  specified  cities  where 
maximum  rates  were  shown  in  Lewis's  table.] 

It  has  not  been  possible  to  cover  all  the  details  of  Mr.  Lewis' 
tables  [Nos.  15  and  16].  To  do  this  would  require  a  long  and 
technical  discussion,  not  warranted  in  this  paper  because  Mr. 
Lewis  apparently  does  not  attach  much  importance  to  the  tables, 
so  far  as  government  ownership  is  concerned. 


152  GOVERNMENT   OWNERSHIP   OF 

[Referring  to  Lewis's  Table  n.] 

This  table  is  incorrect  and  misleading  for  the  following 
reasons : 

1.  In  several  instances  there  are  important  errors  of  fact. 

2.  The  table  does  not  take  into  account  the  shorter  distances 
which  are  the  more  important. 

3.  The  comparison  does  not  take  into  account  important  dif- 
ferences in  the  methods  of  applying  the  unit  charges. 

4.  The  service  given  in  the  foreign  countries  is  "two-num- 
ber" service,  whereas  the  service  given  in  the  United  States  is 
"particular  person"  service,  the  rates  for  which  should  not  be, 
and  are  not,  the  same  in  any  country  where  both  types  of  service 
are  given. 

5.  The  comparison  covers  "ordinary"  service  only,  whereas 
the   Bell   rates   cover  "urgent"   or   express   service.     This   Mr. 
Lewis  admits. 

6.  The  comparison  covers  domestic  service  only,  whereas  a 
fair  comparison  should  include  international  service. 

7.  The  comparison  does  not  take  into  account  differences  in 
the  cost  of  construction  and  in  operating  wages. 

8.  The  comparison  does  not  take  into  account  differences  in 
costs  due  to  differences  in  the  character  of  service. 

9.  The  comparison  does  not  take  into  account  the  fact  that 
toll  service  in  foreign  countries  does  not  pay  for  its  cost. 

These  more  important  considerations,  in  a  comparison  of 
foreign  and  American  toll  rates,  are  discussed  in  detail  below : 

Errors  of  Fact 

In  the  cases  of  Norway  and  France,  Mr.  Lewis  has  confused 
kilometers  with  miles,  the  rates  in  both  cases  applying  to  100 
kilometers,  or  62.1  miles,  and  not  to  100  miles. 

As  to  Austria,  Mr.  Lewis  has  shown  a  rate  of  38  cents  for  all 
distances,  whereas  the  rates  are:  100  miles,  $.38;  300  miles, 
$.61 ;  500  miles,  $.81. 

In  Sweden  the  rate  for  500  miles  is  $.27,  not  $.20. 

In  Denmark  the  correct  rate  for  300  miles  is  $.54,  not  $.40. 

In  Japan  the  correct  rates  for  distances  of  500  and  700  miles 
are  $.87  and  $1.12,  respectively,  and  not  $.82  and  $1.25. 

In  New  Zealand  the  rate  quoted  by  Mr.  Lewis  for  500  miles 


TELEGRAPH   AND   TELEPHONE  153 

must  be  incorrect,  since  it  is  lower  than  that  which  he  quotes 
for  300  miles. 

Denmark.  The  charge  for  "particular  person"  service  is  6.7 
cents.  The  initial  rates  vary  from  6.7  cents  to  53.6  cents.  The 
"particular  person"  rate  is,  therefore,  from  100  per  cent  to  12.5 
per  cent  higher  than  the  two-number  rate. 

Germany.  The  charge  for  "particular  person"  service  is  5.95 
cents  in  addition  to  the  regular  rates.  As  the  rates  vary  from 
4.76  cents  to  47.6  cents,  the  "particular  person"  rate  is  from 
125  per  cent  to  12.5  per  cent  higher  than  the  "two-number"  rate. 

Austria.  The  charge  for  "particular  person"  service  is  6.1 
cents  in  addition  to  regular  rates.  As  the  rates  vary  from  6.1 
cents  to  81.2  cents,  the  "particular  person"  rate  is  from  100  per 
cent  to  7.5  per  cent  higher  than  the  "two-number"  rate. 

In  the  United  States  the  "particular  person"  rates  are  ordi- 
narily 5  cents  higher  than  the  "two-number"  rates  at  short  dis- 
tances (from  5  to  20  miles),  and  are  from  30  per  cent  to  20  per 
cent  higher  than  the  "two-number"  rate  for  longer  distances  in 
the  few  cases  where  "two-number"  service  (optional)  is  given. 

It  will  be  seen  from  the  above  that  for  distances  up  to  30 
miles  the  "particular  person"  rate  in  Europe  is  about  100  per 
cent  higher  than  the  "two-number"  rate;  and  that  for  greater 
distances  the  "particular  person"  rate  is  not  less  than  about  12 
per  cent  higher  than  the  "two-number"  rate.  It  is  a  fact  that  in 
comparing  American  toll  rates  with  foreign  rates,  when  no 
specific  "particular  person"  charge  is  stated,  an  amount  equal  to 
loo  per  cent  of  the  ordinary  rate  for  the  three  minutes  may 
be  added  with  propriety  for  distances  from  25  miles  to  50  miles, 
and  an  amount  equal  to  25  per  cent  should  be  added  for  greater 
distances. 

Mr.  Lewis'  comparison  is,  therefore,  misleading  in  that  the 
rates  compared  are  not  for  the  same  kind  of  service.  In  this 
connection  it  should  be  noted  that  for  the  longer  distances  in 
the  United  States,  when  both  "particular  person"  and  "two- 
number"  service  are  given  (for  example,  New  York-Philadel- 
phia), the  very  great  majority  of  messages  pass  at  the  "par- 
ticular person"  rate,  although  it  is  25  per  cent  higher  than  the 
"two-number"  rate.  This  will  indicate  roughly  to  what  extent 
subscribers  in  France  and  Great  Britain,  for  example,  may  be 
burdened  with  charges  for  unavailing  calls  under  the  "two- 


154"  GOVERNMENT   OWNERSHIP    OF 

number"  system   (i.  e.,  in  cases  when  the  particular  person  de- 
sired is  not  obtained  after  the  connection  is  established). 

[Referring  to  Lewis'  table  17.] 

It  is  in  error  for  the  following  reasons: 

1.  The  statistics  of  toll  conversations  are  erroneous,  because 
in  Germany  local  trunked  calls  are  included  as  "toll"  and  the 
Administration  cannot  give  the  statistics  of  toll  messages;  be- 
cause in  most  foreign  countries  messages  are  counted  by  rate 
periods   and   not    by    actual    conversations;    and    because   inter- 
national messages  are  counted  twice. 

2.  Statistics   of  toll  or  interurban  conversations   cannot  be 
significant  as  to  the  development  of  toll  service  when  related  to 
the  number  of  telephones.     It  is  obvious  that  the  greater  the 
development  of  local  telephone  service,  the  greater  the  propor- 
tion of  subscribers  of  restricted  means,  and  of  subscribers  whose 
social  or  business  circles  are  naturally  limited  to  relatively  small 
spheres.     When  telephone  service  is  largely  confined,  as  it  is  in 
the   government   systems,   to   the  merchants   and  larger  houses 
and  to  the  more  prosperous  residents,  the  number  of  toll  con- 
versations per  telephone  would  be  likely  to  be  high  as   against 
that  in  a  system  where  the  telephone  was  used  by  small  business 
houses  and  in  residences  of  all  classes.    As  will  be  shown  below, 
the  development  in  telephones  is  so  much  greater  in  the  United 
States    than    in    foreign    countries    that    it    might    be    expected, 
although  this  is  not  the  fact,  that  the  number  of  toll  conversa- 
tions per  telephone  in  the  United  States  would  be  lower  than  in 
those  countries. 

For  these  reasons  it  is  more  significant  to  state  the  number 
of  toll  messages  per  capita,  and  this  method  is  analogous  to 
Mr.  Lewis'  method  of  measuring  telegraph  traffic  development 
and  mail  development. 

With  moderate   allowance   for  duplication  in  counting  mes- 
sages in  foreign  countries,  the  interurban  and  long  distance  toll 
traffic  in  the  several  countries  is  as  follows : 
[See  Table  17,  page  155.] 

[Table  18  gives  total  telephones  in  service  and  number  of 
telephones  per  100  population  in  various  countries,  January  i, 

IQI3-] 

[Table  19  gives  comparative  telephone  development  in  prin- 
cipal cities  of  the  United  States  and  in  other  countries.] 


TELEGRAPH   AND   TELEPHONE  iS5 

TABLE  17 

Popula-  Interurban 

tion  in  toll  con- 

thous-  versations 

Country.                                 ands.  per  capita. 

Austria 29,056  .17 

Belgium 7,570  .26 

Denmark* 

France  (1911) 39,601  .71 

German   Empire! 

Great  Britain 46,122  .78 

Hungary  (1911) 21,050  .09 

Italy  (1910) 34,452  .10 

Netherlands 6,078  .82 

Norway 2,422  3.74 

Switzerland'. '.'.'.'. '.'.'.'.'.'.'.'.'.'.'.'.'.'.        3',841  2'. 

New  Zealand W!  -  toilrevue by 

minimum  rate. 

Australia 4,669  .70 

United  States 96,299  3.36 

*  Denmark  not  included,  as  it  is  believed  that,  in  addition  to  the  ordi- 
nary European  "padding"  by  using  rate  periods  and  counting  inward  and 
transit  international  messages,  there  is  the  same  type  of  duplication  in 
counting  messages  between  the  private  companies,  and  between  the  private 
systems  and  the  government  system,  and  between  two  companies  over  the 
government  system.  There  is  no  doubt,  however,  that,  due  to  the  develop- 
ment by  private  companies,  the  traffic  is  higher  than  elsewhere  in  Europe. 

f  The  administration  states  that  no  figure  can  be  given  and  that  those 
quoted  in  the  Journal  Telegraphique  include  free  inter-office  trunk  calls  in 
suburban  traffic — in  addition  to  duplications  in  counting. 

Summary  as  to  Telephones 

Mr.  Lewis'  propositions  concerning  telephones  were :  that 
the  institutional  efficiency  of  private  telephone  systems  was  rela- 
tively low;  that  their  rates  were  relatively  high;  and  that  the 
development  of  their  service  was  relatively  low.  These  propo- 
sitions he  attempted  to  prove  by  various  assumptions  which  were 
erroneous.  In  rebutting  his  assumptions  and  conclusions  it  has 
been  shown  that: 

1.  The    institutional    efficiency    of    the    American    telephone 
service  is  not  exceedingly  low  but  exceedingly  high. 

2.  The    rates    for   American    exchange    service    are   clearly 
lower  than  those  of  any  government  system. 

3.  The  rates  for  telephone  service  are  lower  in  large  Ameri- 
can cities  than  in  many  large  foreign  cities  operated  by  govern- 
ment administrations. 

4.  The  rates  in  the  smaller  American  exchanges  are  strik- 
ingly lower  than  in  the  smaller  exchanges   of  the  government 
systems.     This  is  indicated  most  clearly,   for  general  purposes, 


156  GOVERNMENT   OWNERSHIP    OF 

by  the  disparity  between  the  "rural"  development  in  the  foreign 
countries  and  the  development  in  the  foreign  cities,  resulting 
from  the  disproportionately  high  rates  in  rural  communities  of 
foreign  countries. 

5.  The  history  of  rates  in  American  cities  which  were  for- 
merly competitive  does  not  warrant  the  statement  that,  following 
the  withdrawal  of  competition,   Bell  rates  have  been  increased. 
As  a  matter  of  fact,  it  is  clearly  the  case  that,  in  general,  the 
reverse  has  been  true. 

6.  The  American  toll  rates  are  clearly  lower  than  those  of 
the  government  systems  for  all  distances  within  which  the  great 
volume  of  interurban  toll  traffic  passes ;  and  are,  in  fact,  so  much 
lower,  that  the  American  toll  rates  as  a  whole  are  distinctly  far 
below  the  foreign  toll  rates. 

7.  The  development  of  toll  traffic  in  the  United  States  is  not 
relatively  low,   but  relatively   high,   and   is,   in   fact,   approached 
only   in   those   countries   where   private    operation    of    telephone 
systems  has  materially  fostered  the  development  of  the  utility. 

8.  The  development  of  local  service,  as  indicated  by  local 
traffic  per  capita,  is  at  least  double  that  in  any  foreign  country, 
although  it  is  noteworthy  that,   in  those  countries  which  rank 
nearest  to  the  United  States  in  the  development  of  traffic,  private 
operation  is  a  factor  of  very  great  importance. 

9.  The  development  of  telephones  per  one  hundred  popula- 
tion in  the  United  States  is  more  than  double  that  in  any  foreign 
country. 

10.  The  development  of  American  telephone  service,  as  in- 
dicated by  the  development  in  the  largest  cities,  is  greater,  on  the 
whole,  than  in  foreign  countries.     It  is,   however,   equalled  in 
those  large  foreign  cities  where  private  companies  operate,  either 
exclusively,  or  in  competition  with  the  government. 

11.  The  development  of  telephone  service,   as   indicated  by 
the   number  of   telephones   per   one   hundred  population   in   the 
smaller  exchanges  and  rural  communities,  is  very  much  greater 
in  the  United  States,  not  only  absolutely,  but  relatively  to  the 
development  in  the  large  cities  in  the  respective  countries. 


TELEGRAPH   AND   TELEPHONE 


157 


TABLE  20 

RELATIVE  VALUE  OF  MONEY  IN  FOREIGN  COUNTRIES  AND  IN  THE 
UNITED  STATES,  AS  REFLECTED  IN  THE  WAGES  OF  TELEPHONE 
OPERATORS 
Comparison  of  the  wages  of  ordinary  day  switchboard  operators: 

Minimum    weekly    Weekly   wage    at 
wage.  end  of  three  years. 

Expressed  Expressed 

in  per  cent,  in  per  cent, 


Largest 
Country  exchange. 

Austria Vienna 

Belgium Brussels 

Denmark Copenhagen 

France Paris 

German  Empire.  Berlin 

Great  Britain. ..  London 

Netherlands Amsterdam 

Norway Christiania 

Sweden:' 

State Stockho1m 

Company Stockholm 

Switzerland Zurich 

United  States . . .  New  York 

*  Only  if  the  operator  is  22  years  of  age  or  over;  if  operator  is  less 
than  22  years  of  age,  her  wage  is  less  than  this  figure. 

These  wages  are  here  represented  by  the  minimum  wage  (on  beginning 
full  active  service)  and  the  wage  at  the  end  of  three  years  of  service 
in  the  largest  exchange  in  each  country. 

[In  the  complete  paper  every  statement  is  supported  by  cita- 
tion to  authority.  These  have  been  necessarily  omitted.] 


United 

United 

States 

States 

figure 

figure 

being 

being 

Actual. 

100% 

Actual. 

100% 

$3.00 

50% 

$3.30 

33% 

2.60 

43% 

3.35 

34% 

2.50 

42% 

3.40 

34% 

4.10 

68% 

4.45 

45% 

3.95 

66% 

4.60 

46% 

2.65 

44% 

5.50* 

55% 

3.20 

53% 

7.20 

72% 

3.70 

62% 

4.00 

40% 

3.10 

52% 

4.00 

40% 

3.10 

52% 

4.00 

40% 

5.20 

87% 

6.70 

67% 

6.00 

100% 

10.00 

100% 

Current  Opinion.  56:56.  January,  1914. 
Will  Uncle  Sam  Grab  the  Telephone  Wires. 

The  government  ownership  of  all  means  of  interstate  com- 
munication, including  the  telegraph  and  the  telephone,  is  being 
urged  with  increasing  frequency.  During  the  Taft  administra- 
tion government  control,  tho  not  government  ownership,  was 
advocated  by  Mr.  Wickersham.  The  attitude  of  the  Wilson 
administration  is  not  entirely  clear,  but  there  have  been  sufficient 
rumors  to  warrant  the  question  asked  by  Frederick  Boyd 
Stevenson:  "Is  Uncle  Sam  trying  to  gather  all  the  wires  of  the 
telephone  and  the  telegraph  companies  into  his  hands  and  act 
the  composite  part  of  capitalist,  promoter,  business  manager, 


158  GOVERNMENT   OWNERSHIP   OF 

key-pounder,  messenger  boy,  and  hello-girl?"  If  he  is,  Mr. 
Stevenson  goes  on  to  say,  in  the  Brooklyn  Eagle,  there's  a  nut 
for  the  economic  enigma  solvers  to  crack — and  it's  a  hard  one. 
Representative  David  John  Lewis  of  Maryland  has  presented  to 
the  President  the  data  gathered  by  him  on  the  subject  of  the 
development  of  wire  communication  in  this  country.  From  any 
point  of  view,  Mr.  Stevenson  writes,  the  magnitude  of  the  prop- 
osition of  government  ownership  of  telephones  and  telegraphs 
must  appear  startling. 

"There  are  two  big  corporations  that  control  the  great  ma- 
jority of  the  telephone  and  telegraph  lines  in  the  United  States. 
These  are  the  Postal-Cable  Telegraph  Company  and  the  Amer- 
ican Telephone  and  Telegraph  Company.  With  the  latter  are 
affiliated  the  Bell  Telephone  Company,  the  Western  Union 
Telegraph  Company  and  the  Western  Electric  Company.  In 
addition  there  are  something  like  20,000  local  or  independent 
telephone  companies  of  more  or  less  importance.  All  together 
the  telephone  companies  operate  more  than  8,500,000  telephones, 
which  are  two-thirds  of  the  telephones  operated  in  the  world. 
To  maintain  this  wonderful  system  more  than  18,179,000  miles 
of  wires  are  employed. 

"The  Western  Union  Telegraph  Company  operates  for  tele- 
graph purposes  in  this  country  235,800  miles  of  wire  and  the 
Postal  Telegraph-Cable  Company  350,125  miles  of  land  wire. 
Many  of  the  wires  of  the  Western  Union  Company  are  utilized 
for  telephone  purposes  as  well  as  telegraph.  Then  there  are  the 
railroad  telephone  wires  in  the  United  States  which  consist  of 
120,000  miles.  It  is  impossible  with  the  data  now  obtainable 
to  present  any  satisfactory  figures  regarding  the  wire  mileage 
of  the  20,000  local  and  independent  telephone  companies,  but 
together  they  operate  more  than  4,000,000  telephones.  In  round 
numbers  the  combined  telephone  and  telegraph  land  mileage  of 
the  United  States  is  more  than  18,000,000  miles,  while  the  total 
telephone  and  telegraph  mileage  of  the  world  is  34,566,000  miles." 

The  investment  of  the  two  chief  telegraph  companies  in  cable 
lines  is  not  included  in  Mr.  Stevenson's  calculation.  He  also 
omits  the  investment  in  20,000  independent  telephone  lines  and 
the  investment  in  railroad  wires.  Twenty-two  billion  telephone 
conversations  take  place  in  the  world  in  a  year.  Of  these  no 
less  than  14,500,000,000  fall  to  the  share  of  the  United  States. 


TELEGRAPH   AND   TELEPHONE  159 

In  proportion  to  the  population  the  United  States  has  90  tele- 
phones to  each  thousand  inhabitants,  while  there  are  only  six 
European  countries  which  have  more  than  10  telephones  to 
every  one  thousand  inhabitants. 

Some   Comment   on   Government   Ownership   of   Telephone 
Properties. 

F.  H.  Bethell. 

In  an  effort  to  show  that  our  Post  Office  is  the  most  efficient 
in  the  world  and  our  telephone  system  less  efficient  than  some 
of  the  government  owned  systems  in  Europe,  Mr.  Lewis  resorts 
to  the  most  amazing  use  of  statistics. 

The  total  number  of  pieces  of  mail  is  divided  by  the  total 
number  of  government  employees  in  the  various  countries.  He 
utterly  ignores  the  fact  that  a  large  part  of  the  work  of  handling 
the  mail  in  this  country  is  done  by  employees  of  contractors, 
while  abroad  it  is  handled  by  the  post  office  employees  directly. 
Naturally,  it  is  not  surprising  that  the  number  of  pieces  of  mail 
handled  per  government  employee  is  greater  here  than  abroad. 

The  method  of  using  the  telephone  statistics  is  equally 
astonishing,  even  assuming  that  the  statistics  themselves  are 
correct.  The  total  number  of  messages,  say  in  Norway  and  this 
country,  is  divided  by  the  total  number  of  employees,  not  only 
operators,  but  men  engaged  in  building  pole  lines,  conduits  and 
other  construction  work,  agents  engaged  in  soliciting  new  busi- 
ness, and  a  large  maintenance  force  looking  to  the  upkeep  of  the 
property — something  sadly  neglected  in  government  owned 
systems. 

Mr.  Lewis  in  his  speech  presented  many  statistical  tables, 
statistics  that  must  be  presumed  to  be  correct  in  that  they  were 
presented  by  a  responsible  law  maker  in  an  effort  he  is  making 
to  secure  legislation  that  will,  if  carried  to  its  logical  conclusion, 
bring  about  absolute  paternalism  in  this  great  government  of 
ours.  And  yet  his  statistics  are  so  inaccurate,  so  biased,  so 
unfair,  as  to  amount  to  an  outrageous  imposition  upon  Congress 
and  upon  the  country. 

We  find  him  quoting  $228.00  per  annum  as  the  rate  charged 
for  business  individual  line  service  in  New  York  City,  leaving 
it  to  appear  that  that  is  the  only  rate  charged.  The  fact  is  more 


i6o  GOVERNMENT   OWNERSHIP   OF 

than  50  per  cent  of  the  subscribers  pay  $48.00  or  less  per  annum, 
while  less  than  one-half  of  one  per  cent  pay  as  much  as  $228.00 
for  that  class  of  service. 

Here  is  another  example  of  the  "statistics"  quoted  by  Mr. 
Lewis.  He  has  spoken  so  frequently  and  so  warmly  of  the 
efficiency  and  the  low  rates  of  the  telegraph  service  in  New 
Zealand — twelve  words  for  twelve  cents — that  I  was  interested 
and  desiring  to  know  the  actual  conditions,  inquired  by  cable 
of  a  reliable  source.  Here  is  the  cable  I  received  in  reply: 

New  Zealand  Government  tariffs  for  telegrams  within  New  Zealand 
are — (A)  for  urgent  messages,  one  shilling  [that  is  25  cents]  for  twelve 
words  or  less,  additional  words  one  penny  [that  is  2  cents] ;  (B)  for 
ordinary  messages,  sixpence  [12  cents]  for  twelve  words  or  less,  additional 
words  one-half  penny.  Address  and  signature  counted  and  charged  for. 

In  this  country  there  is  no  charge  for  address  or  signature. 
Hastily  drawn  conclusions,  you  see,  may  be  very  misleading. 
New  Zealand  evidently  is  Utopian  only  when  viewed  from  a 
long  distance.  I  remember  several  years  ago  the  Chief  of  the 
Department  of  Posts  and  Telegraphs  at  Wellington  spent  some 
time  with  us  in  New  York  City,  studying  our  methods.  He 
spoke  most  admiringly  of  our  telephone  system;  referred  to  it 
as  the  best  service  in  the  world,  and  regretted  that  because  of 
government  handicaps,  he  was  unable  to  put  into  practice  some 
of  our  methods.  Particularly  was  he  interested  in  the  manner 
in  which  we  were  extending  the  service  by  means  of  our  selling 
organization,  combining  an  aggressive  canvassing  and  advertis- 
ing policy.  It  would  be  beneath  the  dignity  of  the  government 
he  said,  to  solicit  business  from  the  public. 

Mr.  Burleson  and  Mr.  Lewis  both  urge  that  government 
ownership  would  extend  the  telephone  to  every  man's  home. 
Yet  both  propose  that  those  small  companies,  many  of  them 
guided  and  assisted  by  the  big  commercial  companies  which  have 
extended  and  are  extending  their  services  through  the  sparsely 
settled  sections,  should  be  left  alone.  In  other  words,  while 
they  say  there  ought  to  be  a  telephone  in  every  man's  home, 
they  are  willing  to  leave  it  to  private  enterprise  to  place  the 
telephone  there.  Has  the  Government  really  extended  its  postal 
facilities  to  every  man's  home?  How  many  of  you  touring 
through  the  country  have  not  seen  at  a  fork  from  the  main  road 
a  cluster  of  post  boxes.  The  country  folk,  living  for  many  miles 


TELEGRAPH   AND   TELEPHONE  161 

down  that  side  road,  are  compelled  to  maintain  a  box  on  the 
rural  delivery  route  because  there  is  no  such  route  by  their  doors. 
The  Bell  system  today  reaches  more  than  5,000  places  where  the 
Government  does  not  even  have  a  post  office.  The  rural  tele- 
phone development  in  this  country  is  something  quite  unknown 
in  European  countries.  Some  years  ago,  there  was  an  Inter- 
national balloon  race  from  St.  Louis  eastward,  and  the  British 
competitors  came  down  in  a  farmer's  yard  in  Ohio,  miles  from 
a  railroad  station.  One  of  the  aeronauts  expressed  his  surprise 
that  there  in  an  ordinary  farmhouse,  he  should  find  a  telephone 
ready  to  transmit  a  message  to  the  next  neighbor,  a  telegram 
to  New  York,  or  a  cable  to  his  family  in  England.  This  uni- 
versality of  the  telephone  is  so  much  a  matter  of  course  with 
us  that  we  do  not  realize  the  effort  that  has  brought  it  about. 

The  report  submitted  to  Congress  by  Mr.  Burleson  contains 
many  evidences  of  lack  of  knowledge.  You  will  remember  it 
was  stated  in  that  report  that  the  telephone  buildings  need  not 
be  purchased  because  the  telephone  plant  could  be  easily  moved 
into  the  Post  Offices  and  one  building  accommodate  both  services. 
You  all  know  something  about  the  accommodations  in  your 
Post  Office  here  in  Albany.  I  should  like  to  have  you  view  our 
buildings,  go  through  our  various  Central  offices,  look  over  our 
apparatus,  and  then  decide  for  yourself  the  reasonableness  of 
Mr.  Burleson's  statement. 

In  Albany  we  are  now  occupying  eight  buildings,  containing 
thirty-eight  thousand  square  feet  of  floor  space,  and,  as  you 
know,  have  planned,  and  are  now  building  a  magnificent  ten- 
story  building  to  take  care  of  what  we  consider  will  be  Albany's 
need  for  telephone  service  in  the  future.  The  Newburgh  Journal, 
commenting  on  Mr.  Burleson's  plan,  says : — 

Here  in  Newburgh,  the  present  post  office  building  is  inadequate  for 
the  postal  department  as  it  has  of  these  great  public  utilities,  it  is  no 
telephone  building,  a  structure  larger  than  the  post  office,  could  be  housed 
in  the  cramped  quarters  of  the  post  office  certainly  has  elements  of  humor. 
If  the  committee  which  favors  the  absorption  by  the  Government  of  the 
telephone  and  telegraph  lines  has  as  much  real  practical  knowledge  of 
the  postal  department  as  it  has  of  these  great  public  utilities,  it  is  no 
wonder  the  postal  department  pays  no  dividends. 


162  GOVERNMENT   OWNERSHIP    OF 

Quarterly  Journal  of  Economics.  28:581-6.    May,  1914. 

Public  Ownership  of  Telegraphs  and  Telephones. 
A.  N.  Holcombe. 

The  objection  to  the  statistical  evidence  presented  in  the  Post 
Office  departmental  reports  is  not  the  difficulty  of  drawing  from 
it  some  valid  and  trustworthy  conclusions, — tho  that  difficulty 
is  real  enough.  The  serious  objection  lies  in  the  fact  that  such 
statistical  comparisons  are  likely  to  prove  altogether  too  much. 
A  comparison,  for  example,  of  telephone  development  in  Iowa 
with  that  in  Mississippi  will  furnish  the  same  evidence  of  dis- 
parity with  respect  to  efficiency  as  is  afforded  by  the  Postmaster 
General's  comparisons  in  the  case  of  the  United  States  as  a 
whole  and  Europe.  In  the  cotton  belt  however,  private  enter- 
prise has  enjoyed  the  same  freedom  as  in  the  corn  belt.  If  the 
development  of  the  service  in  the  former  has  lagged  behind  that 
in  the  latter,  the  explanation  must  be  sought  in  circumstances 
wholly  unrelated  to  the  question  of  government  versus  private 
ownership.  In  fact,  the  physical,  economic,  and  social  conditions 
are  very  different  in  Iowa  from  what  they  are  in  Mississippi, 
and  differences  in  the  development  of  the  means  of  communica- 
tion inevitably  ensue.  This  is  true,  not  only  of  the  telegraph 
and  telephone,  but  of  all  the  means  of  communication,  and, 
indeed,  of  labor-saving  devices  generally.  One  would  expect 
to  find  in  Iowa,  not  only  more  telephones  than  in  Mississippi, 
but  also  more  automobiles,  type-writers,  cash-registers,  steam 
shovels,  and  fountain  pens.  The  same  holds  of  a  comparison 
between  the  United  States  as  a  whole  and  Europe.  The  question 
of  government  versus  private  ownership  certainly  has  little  rela- 
tion to  these  differences. 

The  Postmaster  General,  in  his  attempt  to  prove  the  desir- 
ability of  the  "postalization"  of  the  telegraphs  and  telephones, 
has  barked  up  the  wrong  tree.  The  American  public  will  never 
be  convinced  of  the  superiority  of  government  ownership  by 
statistical  comparisons.  Whether  or  not  government  ownership 
will  "pay"  in  this  country,  depends  partly  upon  the  price  which 
must  be  given  in  order  to  acquire  the  existing  telegraph  and 
telephone  properties,  but  in  the  long  run  mainly  upon  the  char- 
acter of  the  organization  which  will  be  provided  under  govern- 


TELEGRAPH   AND   TELEPHONE  163 

ment  ownership  for  the  conduct  of  the  business.  The  Postmaster 
General  who  would  win  the  confidence  of  the  public  for  a 
proposal  to  "postalize"  the  telegraph  and  telephone,  must  pro- 
duce, not  statistics  but  a  plan  for  the  conduct  of  the  business, 
which  will  hold  out  the  promise  of  more  economical  and  more 
efficient  operation  than  is  now  the  case.  The  Post  Office 
departmental  report  contains  no  intimation  of  the  present 
existence  of  such  a  plan. 

Electrical  World.  51:609-10.  March  21,  1908. 

Congress  and   Wireless  Telegraphy.     Walter  W.   Massie. 

The  public  has  probably  little  idea  of  the  serious  menace  to  the 
future  of  wireless  telegraphy  which  is  offered  by  the  Hale  bill  to 
regulate  wireless  telegraphy,  now  before  Congress. 

It  would  be  interesting  to  know  whether  the  various  Govern- 
ment officials  are  acting  blindly  or  are  knowingly  attempting  to 
force  legislation  that  will  have  the  immediate  effect  of  arresting 
the  development  of  a  valuable  art  and  deprive  the  public  of  a 
service  that  would  in  time  give  them  trans-oceanic  telegraphy  at 
one-tenth  the  rates  now  paid  for  cable  service. 

The  bill,  which  would  give  the  Government  full  control  of  the 
wireless  field,  deals  with  existing  conditions  without  considering 
the  fact  that  wireless  is  still  in  its  infancy  and  is  making  enor- 
mous strides  each  year.  Where  would  our  telegraph  service  be 
today  had  the  Government  taken  control  of  it  in  the  forties  and 
said  there  could  be  only  one  wire  between  two  places?  It  is  true 
that  there  is  a  great  deal  of  interference  between  wireless  stations 
today,  but  is  it  to  the  best  interests  of  all  to  have  the  Government 
take  control  and  say  there  shall  be  only  one  station  in  a  given 
locality  for  the  reason  that  another  nearby  station  would  cause 
interference?  It  would  be  far  better  to  let  the  situation  stand 
as  it  is  and  give  inventors  an  opportunity  to  overcome  the 
present  difficulties;  and  from  my  practical  work  in  this  field,  I 
know  that  it  will  not  be  many  months  before  this  is  accomplished. 

Under  the  proposed  act  we  would  be  compelled  to  go  to  the 
Government  for  a  license  whenever  we  wished  to  build  a  station, 
in  which  case  a  permit  would  be  granted  if  the  station  is  to  be 
in  a  locality  distant  from  other  stations.  For  instance,  assume 
that  we  desire  to  establish  an  independent  trans-Atlantic  wireless 


164  GOVERNMENT   OWNERSHIP    OF 

service,  and  we  apply  to  the  Government  for  a  permit,  the  locality 
being,  say,  somewhere  on  the  New  England  coast.  There  are 
already  numerous  stations  the  entire  length  of  the  coast,  and  if 
we  were  fortunate  enough  to  obtain  a  permit  at  all  it  would  be 
with  restrictions  to  hours  during  which  none  of  the  other  stations 
cares  to  operate.  Moreover,  is  it  to  be  supposed  that  the  telegraph 
and  cable  companies  will,  if  the  Hale  bill  is  enacted,  remain 
passive  and  allow  us  to  establish  trans-Atlantic  service  when  a 
protest  and  a  little  influence  used  in  Washington  will  prevent  it? 

The  telegraph  and  cable  companies  have  been  very  persistent 
in  publicly  ignoring  wireless  telegraphy  as  a  competitor. 

The  telegraph  companies  are  realizing  their  danger  from 
competition;  and  with  the  Government  innocently  (?)  acting  in 
their  interest,  the  public  would  be  deprived  of  all  the  benefits  of 
legitimate  competition. 

As  for  the  development  of  wireless  telegraphy,  we  have  only 
to  compare  the  present  conditions  in  Great  Britain  and  this 
country.  When  the  Marconi  Company  was  first  formed  it  ob- 
tained a  lo-year  license  or  contract  from  the  English  Govern- 
ment; as  a  result  it  is  the  only  company  today  in  England,  and 
the  English  battle-ships  have  only  such  apparatus  as  the  Marconi 
Company  can  give  them.  On  the  other  hand,  in  the  United 
States  there  are  now  seven  or  eight  companies  in  vigorous  com- 
petition, which  has  resulted  in  improvement  of  apparatus  and 
increase  of  efficiency  to  such  an  extent  that  our  navy  today  stands 
first  in  wireless  and  holds  the  record  for  long-distance  marine 
communication.  Our  merchant  marine  is  also  getting  the  advan- 
tage of  competition  and  receiving  wireless  service  at  reasonable 
rates,  while  the  English  merchant  marine  is  compelled  to  use  the 
Marconi  system  or  none,  and  at  whatever  price  demanded. 

As  to  the  grievance  of  the  Government  with  respect  to  inter- 
ference, I  may  cite  a  case  that  happened  on  the  Sound  last  fall. 
A  government  message  was  being  sent  from  Washington  to 
Newport  via  Fire  Island  (all  land  stations)  ;  complaint  was  made 
because  Sound  boats  interfered  with  the  transmission  and  it  was 
asked  that  boat  work  should  cease  when  government  plants  were 
sending.  In  time  of  peace,  and  when  both  the  Western  Union 
and  Postal  Telegraph  Companies  are  rendering  efficient  service 
between  Washington  and  Newport,  is  it  just  to  make  such  a 
demand  and  use  wireless  to  the  detriment  of  the  service  of  boats 
which  are  dependent  wholly  upon  the  wireless? 


TELEGRAPH   AND   TELEPHONE  165 

It  is  lack  of  capital  that  is  holding  back  the  development  of 
wireless  telegraphy,  which  lack  is  largely  due  to  the  uncertain 
status  of  the  industry  owing  to  threatened  interference  by  the 
Government;  but,  even  with  dearth  of  capital,  I  firmly  believe 
that  within  five  years,  barring  government  interference,  we  will 
see  it  successfully  competing  with  cables  and  trunk  lines,  and 
that  trans-oceanic  rates  will  be  cut  down  to  a  fraction  of  what 
they  are  today.  From  my  experience  and  observation,  I  am 
thoroughly  convinced  that  within  10  years  the  laying  of  trans- 
oceanic cables  will  entirely  cease,  and  while  the  use  of  the  present 
cables  will  undoubtedly  be  continued,  the  wireless  system  will  be 
installed  and  maintained  at  a  cost  less  than  what  would  be  the 
interest  on  the  cost  of  a  new  cable. 

The  art  of  wireless  telegraphy  is  still  young.  Scarcely  a  de- 
cade has  passed  since  its  practical  value  was  first  demonstrated. 
Important  improvements  are  constantly  being  made,  and  with 
increasing  knowledge  of  etheric  radiation  inventors  will  still 
further  perfect  the  art  unless  all  incentive  to  do  so  is  removed  by 
governmental  action  such  as  the  Hale  bill  authorizes. 

Railroad  Transportation,  p.  257. 

Arthur  T.  Hadley. 

Government  ownership  of  the  telegraph  prevailed  in  conti- 
nental Europe,  because  each  country  was  more  or  less  of  a 
bureaucracy;  that  is,  the  civil  service  governed  the  country,  and 
was  so  well  organized  that  it  extended  itself  as  a  matter  of 
course.  In  America  the  civil  service  is  not  so  well  organized, 
does  not  govern  the  country,  and  is  not  allowed  to  extend  itself 
as  a  matter  of  course.  Political  reasons  decided  the  question  in 
favor  of  a  government  telegraph  in  Europe.  Political  reasons 
form  the  main  ground  against  a  government  telegraph  in  the 
United  States. 

Baltimore  (Md.)  t  American.     April  10,  1908. 
Reprint  of  Statement  Made  in  1808  by  Thomas  Jefferson. 

Having  always  observed  that  public  works  are  much  less  ad- 
vantageously managed  than  the  same  are  by  private  hands,  I  have 
thought  it  better  for  the  public  to  go  to  market  for  whatever  it 
wants  which  is  to  be  found  there. 

14 


i66      .  GOVERNMENT   OWNERSHIP    OF 

United  States.   President  Taft's  special  message  to  Congress, 

February  22,  1912,  relating  to  Postmaster  General 

Hitchcock's  proposal  for  a  postal  telegraph. 

This  presents  the  question  of  a  government  ownership  of  public 
utilities,  which  are  now  being  conducted  by  private  enterprise 
under  franchises  from  the  Government.  I  believe  that  the  true 
principle  is  that  private  enterprises  should  be  permitted  to  carry 
on  such  public  utilities  under  due  regulation  as  to  rates  by 
proper  authority,  rather  than  that  the  Government  should  itself 
conduct  them.  This  principle,  I  favor,  because  I  do  not  think  it 
in  accordance  with  the  best  public  policy  thus  greatly  to  increase 
the  body  of  public  servants. 

Of  course,  if  it  could  be  shown  that  telegraph  service  could  be 
furnished  to  the  public  at  a  less  price  than  it  is  now  furnished  by 
telegraph  companies, .  and  with  equal  efficiency,  the  argument 
might  be  a  strong  one  in  favor  of  the  adoption  of  the  proposition. 
But  I  am  not  satisfied  from  any  evidence  that  i£  these  properties 
were  taken  over  by  the  Government  they  could  be  managed  any 
more  economically  or  any  more  efficiently,  or  that  this  would 
enable  the  Government  to  furnish  service  at  any  smaller  rate  than 
the  public  is  now  required  to  pay  by  private  companies. 

Wilson,  Woodrow.    Speech  before  Federation  of  Democratic 
Clubs  in  Pennsylvania,  Harrisburg,  June  15,  1911. 

[Reprinted  in  Congressional  Record,  August  14, 1912,  p.  11824.] 

The  regulation  of  corporations  is  hardly  less  significant  and 
central.  We  have  made  many  experiments  in  this  difficult  matter, 
and  some  of  them  have  been  crude,  and  hurtful,  but  our  thought 
is  slowly  clearing.  We  are  beginning  to  see,  for  one  thing,  how 
public-service  corporations,  at  any  rate,  can  be  governed  with 
great  advantage  to  the  public  and  without  serious  detriment  to 
themselves,  as  undertakings  of  private  capital.  Experience  is 
removing  both  prejudice  and  fear  in  this  field,  and  it  is  likely 
that  within  the  very  near  future  we'  shall  have  settled  down  to 
some  common,  rational,  and  effective  policy.  The  regulation  of 
corporations  of  other  sorts  lies  intimately  connected  with  the 
general  question  which  ramifies  in  a  thousand  directions,  but  the 
intricate  threads  of  which  we  are  slowly  beginning  to  perceive 
constitute  a  decipherable  pattern.  Measures  will  here  also  frame 
themselves  soberly  enough  as  we  think  our  way  forward. 


TELEGRAPH   AND   TELEPHONE  167 

The   State. 

Woodrow  Wilson. 

Society  can  by  no  means  afford  to  allow  the  use  for  private 
gain  and  without  regulation  of  undertakings  necessary  to  its  own 
healthful  and  efficient  operation  and  yet  of  a  sort  to  exclude 
equality  in  competition.  Experience  has  proved  that  the  self- 
interest  of  those  who  have  controlled  such  undertakings  for 
private  gain  is  not  coincident  with  the  public  interest :  even  en- 
lightened self-interest  may  often  discover  means  of  illicit  pecu- 
niary advantage  in  unjust  discriminations  between  individuals  in 
the  use  of  such  instrumentalities.  But  the  proposition  that  the 
Government  should  control  such  dominating  organizations  of 
capital  may  by  no  means  be  wrested  to  mean  by  any  necessary 
implication  that  the  Government  should  itself  administer  those 
instrumentalities  of  economic  action,  which  cannot  be  used  except 
as  monopolies.  In  such  cases,  as  Sir  T.  H.  Farrar  says,  "there 
are  two  great  alternatives,  (i)  ownership  and  management  by 
private  enterprise  and  capital  under  regulation  by  the  State, 
(2)  ownership  and  management  by  Government,  central  or  local." 
Government  regulation  may  in  most  cases  suffice.  Indeed,  such 
are  the  difficulties  in  the  way  of  establishing  and  maintaining 
careful  business  management  on  the  part  of  the  Government  that 
control  ought  to  be  preferred  to  direct  administration  in  as  many 
cases  as  possible, — in  every  case  in  which  control  without 
administration  can  be  made  effectual. 

American   Telephone    and   Telegraph    Company. 

Statistics   Showing  the  Extent  to  which  Employees  under  Civil 
Service  Might   Be  Increased  by  Public  Ownership   of  the 
Telephones,  Telegraphs  and  Railways  in  the  United  States. 
The  number   of   employees  in  telegraph,   telephone,   railroad 
and  post  office  work  is  as  follows: — 

Utility  No.  of  Employees 

Commercial    Telephone    (Census    Report    1907)  142,436* 

Commercial  Telegraph   (Census  Report  1907)  28,034 

Railways  (Interstate  Commerce  Commission  Report 

1909)  1,502,823** 

Postal  Service   (Postmaster  General's  Report  1909)  325,000 

1,998,293 

"Including  75,653  female  operators. 
**Including  39,115  dispatchers  and  telephone  operators. 


i68  GOVERNMENT   OWNERSHIP    OF 

The   following   is   the    number  of   votes   cast   in  presidential 
elections : 

Votes  for  Plurality  of 

Winning  Winning 

Year                          Total  Vote                 Candidate  Candidate 

1876                                8,412,723                       4,033,950  250,935 

1880                                9,209,406                       4,449,053  7,018 

1884                              10,044,985                       4,911,017  62,683 

1888                              11,380,860                       5,440,216  98,017 

1892                              12,059,348                       5.556,918  380,810 

1896                              13,923.102                       7,104,779  601,854 

1900                              13,959,653                       7,207,923  849,790 

1904                              13',510,648                       7,623,486  2,545,575 

1908                              14,888,442                       7,678,908  1,269,804 


Some  Facts  about  the  Parcels  Post. 

James  A.  Stewart. 

The  following  remarks  are  not  intended  as  a  reflection  upon 
the  parcel  post  as  an  institution,  nor  upon  the  plan  as  originally 
devised,  but  rather  to  show  the  results  of  trying  to  conduct  a 
commercial  business  upon  a  rational  basis  through  a  centralized 
government  bureau,  and  to  indicate  what  is  likely  to  happen 
should,  it  devolve  upon  this  same  department  to  deal  with  the 
vastly  more  complicated  local  and  toll  telephone  rates. 

Statements  quoted  below  from  the  Congressional  Record 
were  made  largely  by  western  Senators,  who  approved  of  the 
establishment  of  the  parcel  post.  In  fact,  the  distinguished  Sen- 
ator from  Kansas,  Mr.  Joseph  Bristow,  was  Chairman  of  the 
Sub-Committee  on  Post  Offices  and  Roads,  which  drafted  the 
original  law. 

Mr.  Bristow  is  peculiarly  well  qualified  to  discuss  the  subject 
as  he  was  Fourth  Assistant  Postmaster  General  under  Presidents 
McKinley  and  Roosevelt. 

Radical  Changes  made  in  Rates  without  Proper  Investigation 

In  1912,  after  a  very  complete  study,  Congress  passed  a 
Parcel  Post  Law  fixing  the  maximum  weight  at  eleven  pounds 
and  providing  rates  classified  by  eight  zones,  the  radius  of  the 
minimum  zone  being  fifty  miles.  In  order  to  determine  the 
revenue  derived,  special  stamps  were  provided  for  this  class  of 
service.  Without  waiting  for  the  report  of  the  Commission 
appointed  by  Congress  to  study  the  effect  of  these  rates  and 


TELEGRAPH   AND   TELEPHONE  169 

classifications  upon  the  revenue,  the  Post  Office  Department 
raised  the  maximum  weight  to  twenty  pounds  and  then  to  fifty 
pounds,  enlarged  the  minimum  zone  from  50  to  150  miles,  made 
certain  reductions  in  the  rates  and  abolished  the  distinctive 
stamps.  That  these  changes  must  have  been  made  without  a 
knowledge  of  the  probable  effect  upon  the  revenues  produced  by 
the  original  law  is  indicated  from  the  following  remarks  of  Sen- 
ators, as  reported  in  the  Congressional  Record,  for  February, 
1914- 

Page  4109 

SENATOR  POINDEXTER  (Wash.).  I  want  to  say  in  answer  to  the  Senator 
from  Kansas  that  I  have  here  a  very  elaborate  table  of  figures  from  the 
Post  Office  Department  giving  the  cost  and  the  receipts  of  the  parcel  post. 

SENATOR  BRISTOW  (Kansas).  I  desire  to  state  to  the  Senator  from 
Washington  that  the  estimates  are  mere  guesses.  Whenever  the  use  of 
the  distinctive  stamp  was  abolished  all  opportunity  of  ascertaining  the 
revenue  from  the  parcel  post  was  destroyed.  To  determine  it  is  utterly 
impossible.  You  may  inquire  of  postmasters  anywhere  throughout  the 
country  and  they  will  tell  you  that  these  estimates  are  mere  guesses  and 
nothing  else. 

Page  4216 

SENATOR  LODGE  (Mass.).  Mr.  President,  will  the  Senator  allow  me 
to  ask  him  a  question  there? 

SENATOR  BRISTOW    (Kans.).     Yes. 

SENATOR  LODGE.  How  does  the  Postmaster  General  ascertain  the  cost 
of  transportation?  I  understand  the  separate  stamp  has  been  abolished, 
and  the  ordinary  letter  stamp  may  be  used. 

SENATOR  BRISTOW.     Yes. 

SENATOR  LODGE.  How,  without  a  separate  stamp,  can  he  reach  accu- 
rately the  cost  of  the  parcel  post? 

SENATOR  BRISTOW.     He  cannot.     It  is  an  estimate. 

SENATOR  LODGE.  Then  we  have  no  means  of  knowing  accurately  what 
the  parcel  post  costs? 

SENATOR  BRISTOW.     No;   thtre  is  not  any  way  of  telling. 

SENATOR  LODGE.  And  we  cannot  tell  while  we  have  no  separate 
stamp? 

SENATOR  BRISTOW.     No. 

SENATOR  LODGE.     It  is   all  jumping  in  the  dark? 

SENATOR  BRISTOW.     I  think   so. 

Page  4223 

SENATOR  BRISTOW.  But  what  has  happened?  With  but  a  few  months' 
investigation,  practically  with  little  investigation,  we  have  gone  from  step 
to  step  until  now  we  are  loading  tons  of  iron  ore  and  groceries  into  the 
mails  and  breaking  down  the  rural  contractors,  who  contracted  to  carry 
letters  and  papers  and  simply  incidental  small  packages. 


i;o  GOVERNMENT   OWNERSHIP   OF 

Rates  Higher  than  Express  Rates  in  Many   Cases 

In  spite  of  the  claims  made  for  the  success  of  the  parcel 
post,  the  rates  for  the  longer  hauls  and  heavier  packages  are  now 
greater  than  those  of  the  express  companies. 

Cong.  Record,  Page  4221 

SENATOR  BRYAN  (Fla.).  The  Senator  also  inquired  as  to  the  relative 
cost  now,  since  the  express  rates  have  been  reduced  by  order  of  the 
Interstate  Commerce  Commission.  Stating  it  generally,  subject,  perhaps, 
to  a  few  minor  exceptions,  under  the  rates  established  by  the  Interstate 
Commerce  Commission  for  the  express  companies  and  under  the  rates 
which  the  Postmaster  General  has  established,  the  postal  rates  are  less 
than  the  express  rates  up  to  4  pounds;  they  are  about  the  same  for  5 
and  6  pounds,  and  then  the  parcel-post  rates  are  greater  than  the  express 
rates. 

A  few  of  the  comparative  rates  are  given  below: 

Parcel-post  rate  between  New  York  and  Pittsburg,  Pa.,  20-lb. 

package  $  .83 

Express  rate  •  between  New  York  and  Pittsburg,  Pa.,  20-lb. 

package  46 

Parcel-post  rate  between  New  York  and  Muskegon,  Mich.,  20-lb. 

package  1.22 

Express  rate  between  New  York  and  Muskegon,  Mich.,  20-lb. 

package  65 

Parcel-post  rate  between  New  York  and  Des  Moines,  la.,  20-lb. 

package  .* 1.61 

Express  rate  between  New  York  and  Des  Moines,  la.,  20-lb. 

package     82 

The  parcel  post  rates  here  quoted  are  for  packages  uninsured, 
whereas  the  express  rates  are  for  packages  insured  up  to  $50.  The 
rate  for  insuring  the  same  packages  sent  by  parcel  post  to  the 
value  of  $50  would  be  loc.  in  addition  to  the  rates  quoted  above 
for  a  2O-lb.  package. 

It  must  also  be  borne  in  mind  that  the  Government  does  not, 
through  the  parcel  post,  furnish  a  service  equivalent  to  that  of 
the  express  companies.  The  parcel  post  omits  the  following 
essentials  of  a  complete  service: 

1.  It  does  not  collect  parcels; 

2.  It  does  not  give  receipts ; 

3.  It  does  not  provide  indemnity  for  loss,  except  upon  extra 
payment  and  only  to  the  amount  of  $50 ; 

4.  It  does  not  provide  any  indemnity  for  damage; 

5.  It  does  not  provide  controlling  records,  by  reason  of  which 
omission  the  volume  of  loss  is  increased; 


TELEGRAPH   AND   TELEPHONE  171. 

6.  It  does  not  provide  special  means  of  security  for  valuable 
parcels  ; 

7.  It  does  not  provide  adequate  protection  against  damage, 
but,  on  the  contrary,  promotes  damage   and   loss  by  opening  in 
transit ; 

8.  It  does  not  provide  for  the  transportation  of  a  wide  range 
of  special  commodities. 

The  Post  Office  Embarks  in  the  Freight  Business  Without  any 
Preparation 

When  the  original  limit  of  eleven  pounds  was  fixed,  it  was 
thought  that  packages  of  this  weight  could  be  carried  with  the 
ordinary  mail  and  in  the  regular  mail  cars,  and  that  the  rural 
carriers  would  not  be  overloaded  in  delivering  such  packages. 
When,  however,  the  weight  was  raised  to  fifty  pounds,  the  Gov- 
ernment practically  went  into  the  business  of  transporting  freight. 
Shippers  began  sending  iron  ore,  bricks  and  other  heavy  freight 
by  mail. 

Pages  4217-8 

SENATOR  LODGE.  If  the  Government  is  going  to  enter  into  the  busi- 
ness of  carrying  freight,  it  should  carry  it  at  freight  rates  and  not  at 
mail  rates. 

SENATOR   BRISTOW.     That  is  exactly  the  point. 

SENATOR  LODGE.  They  ought  to  do  it  as  freight  business  is  done; 
they  ought  to  carry  it  at  freight  rates  and  as  heavy  freight,  and  not  with 
the  delivery  and  at  the  rate  which  the  mail  service  costs.  It  seems  to  me 
that  we  are  now  going  along  on  the  apparent  idea  that  this  is  a  profitable 
system.  Just  as  long  as  you  are  robbing  the  star  routes  and  robbing  the 
railroads  and  robbing  the  rural  carriers  you  can  say  that  it  is  profitable, 
but  it  will  not  last;  it  will  end  the  moment  the  Government  is  brought 
face  to  face  with  the  actual  cost  it  will  have  to  pay  to  carry  the  freight. 

SENATOR  BRISTOW.  The  Senator  from  Massachusetts  is  absolutely 
right.  We  have  undertaken  to  adapt  the  freight  business  to  a  postal 
system.  As  long  as  you  can  confine  the  parcel-post  to  small  packages  it 
is  all  right.  Under  the  zone  system  which  we  developed,  if  the  Postmaster 
General  had  let  it  alone,  we  would  have  gone  along  nicely,  and  then  if  we 
had  concluded  that  it  was  desirable  to  increase  the  weight  of  the  package 
so  as  to  make  it  freight  business  we  would  first  have  organised  a  system 
for  carriers  of  freight  different  from  that  for  carriers  of  mail.  That  is 
the  fundamental  difficulty  which  is  confronting  the  Congress  now. 

Page  4223 

SENATOR  BRISTOW  (Kan.).  Now  I  come  to  another  interesting  state- 
ment (Quoting  from  a  letter  from  a  star  route  contractor  in  Idaho)  : 

"Allow    me    to    call    your    attention    to    the    contractors    on    the    routes 


172  GOVERNMENT   OWNERSHIP   OF 

between  Boise  and  Idaho  City,  and  Mountain  Home  and  Rocky  Bar.  When 
the  contractor  of  the  Boise-Idaho  City  took  the  contract  his  bid  was  for 
$7.68  per  trip;  parcel  post  so  increased  the  mail  and  diminished  the  express 
that  he  was  forced  to  give  up  his  contract,  and  his  bondsmen,  who  are 
now  operating  the  line,  are  doing  so  at  the  cost  of  $46  per  day.  The 
same  facts  are  true  in  the  case  of  the  Mountain  Home  contractor." 

SENATOR  BRISTOW.  Another  interesting  statement  which  I  want  to 
call  to  the  attention  of  the  Senator  is  this: 

"After  throwing  up  his  hands  in  despair  and  calling  for  aid,  when 
three  carloads  of  ore,  in  so-pound  packages,  shipped  by  parcel  post, 
were  handed  him  to  deliver  recently — ' 

Now,  think  of  that.  I  should  like  to  call  the  attention  of  the  Senate 
to  this  proposition. 

SENATOR  GALLINGER  (New  Hampshire).     Three  carloads? 

SENATOR     BRISTOW.     Three     carloads     of     ore — "the     contractor     who 
handles    the    mail    between    Stites    and    Elk    City,    Idaho,    is    expected    to 
succumb    when   he   begins    to    receive    from    Spokane    a    50,000    parcel    post 
shipment   of  groceries  over  the  same  route." 
Page  4217 

SENATOR  CLARK  (Wyoming).  When  the  Postmaster  General  assures 
us  that  there  is  at  the  present  time  a  great  surplus,  and  more  revenue 
coming  in  to  the  mail  service  or  the  Post  Office  Department  by  reason  of 
the  parcel  post,  he  fails  to  take  into  account  the  mail  'carriers  and  the 
mail  contractors  that  he  is  forcing  into  bankruptcy  because  they  are 
carrying  all  this  increased  mail  at  no  increased  cost  to  the  Government; 
and  when  he  comes  to  let  his  new  contracts  he  will  either  have  to  throw 
up  these  mail  routes  or  else  he  will  have  to  let  them  at  such  figures  as 
will  permit  the  carrying  of  freight. 

The  apparent  revenue  vanishes  into  thin  air  when  those  things  are 
considered.  We  are  compelling  these  contractors  to  carry  this  mail  for 
nothing,  and  taking  the  revenue  and  calling  it  a  net  profit  on  the  service. 
Mr.  President,  it  would  be  the  worst  thing  that  could  happen  to  this 
country  if  any  scheme  should  be  evolved  that  would  break  down  the  star- 
route  service  in  the  country  remote  from  railroads. 

Furthermore,  the  rural  carriers  are  also  affected,  but  they 
have  been  to  some  extent  compensated  by  increased  pay.  The 
reflection  of  all  these  increases  is  yet  to  be  shown  in  the  ex- 
penses and  many  of  the  rural  carriers  are  still  dissatisfied. 
There  is  also  the  possibility  that  instead  of  the  rural  carriers 
being  able  to  carry  the  parcel-post  packages  with  other  mail, 
that  a  separate  rural  delivery  for  parcels  post  will  be  necessary. 

Saturday  Evening  Post.    pp.  77-9.    April  18,  1914. 
The  Lame  Duck. 

Take  the  Post  Office  situation,  because  there  are  more  post- 
masterships  than  other  offices.  Postmaster  General  Burle- 


TELEGRAPH   AND   TELEPHONE  173 

son,  working  at  the  highest  possible  speed,  appointed  sixteen 
thousand  postmasters  during  the  first  year  of  the  Wilson  ad- 
ministration. He  replaced  sixteen  thousand  Republican  post- 
masters with  sixteen  thousand  Democratic  postmasters — an 
average  of  more  than  fifty  a  day  for  the  three  hundred  working 
days  of  the  year.  That,  of  course,  didn't  make  much  of  a  dent 
in  .the  total  number  of  postmasters  in  this  country,  which  is  in 
the  neighborhood  of  eighty  or  ninety  thousand;  but  it  shows 
that  the  Postmaster  General  is  at  least  making  an  earnest  effort 
to  put  Democrats  where  Republicans  have  flourished  for  sixteen 
years,  subject  to  such  limitations  as  are  prescribed. 

The  Postmaster  General  is  blameless.  His  appointments  are 
made  according  to  his  best  lights.  He  is  an  able  and  consci- 
entious man,  and  he  has  a  place  of  enormous  difficulty.  The 
Senators  and  Representatives  are  not  to  blame.  They  do  the  best 
they  can  for  the  party,  for  the  local  communities  affected,  and 
with  an  eye  to  the  most  advantageous  political  effect.  The 
President  is  not  to  blame.  He  depends,  as  he  must,  on  the 
recommendations  of  those  beneath  him,  who  are  familiar  with 
all  the  circumstances. 

It  is  the  system  that  is  to  blame — the  system  of  parceling  out 
offices  as  reward  for  voting  this  way  or  that;  the  system  that 
places  the  administration  of  the  business  affairs  of  this  Govern- 
ment in  the  hands  of  the  party  for  the  instant  in  power  and, 
disregarding  the  plain  business  sense  of  the  situation,  makes  a 
political  reward  of  an  administration  place  instead  of  making 
that  place  a  business  responsibility. 

Of  course  all  this  is  as  old  as  the  hills.  It  has  been  going  on 
since  we  began  as  a  nation,  and  in  all  probability  it  will  go  on 
until  the  end.  I  cite  it  merely  to  show  that,  so  far  as  demanding 
spoils  for  victory  is  concerned,  we  haven't  advanced  an  inch 
beyond  the  days  of  the  early  seventies,  notwithstanding  all  our 
efforts  at  civil-service  reform — not  advanced  an  inch,  I  mean,  so 
far  as  the  impulse  is  predicated. 

Under  pressure  of  public  opinion  the  civil  service  has  been 
expanded  and  it  retains  many  persons  in  office ;  but  in  their  hearts 
the  members  of  the  dominant  party  always  loathe  the  civil  service, 
and  there  never  has  been  a  minute  in  the  past  30  years  when 
civil-service  law  would  not  have  been  repealed  if  the  men  with 
the  repealing  power  had  dared. 


174  GOVERNMENT   OWNERSHIP   OF 

Saturday  Evening  Post.     September  13,   1913. 
A  Question  of  Justice. 

Federal  salaries  have  not  been  systematically  revised  during 
all  the  years  when  cost  of  living  has  been  steadily  rising.  One 
soulless  corporation  after  another  has  adopted  a  pension  scheme 
for  its  employees.  The  Government  has  none.  From  the  in- 
sufficient data  at  hand  it  is  calculated  that  something  like  ten 
thousand  injuries  to  federal  employees  arise  every  year  from 
industrial  accidents ;  and  in  compensating  the  victims  the  Gov- 
ernment lags  much  behind  the  standards  that  the  people  through 
legislative  action  have  enforced  upon  private  employers. 

Only  for  employees  in  occupations  that  are  deemed  hazard- 
ous— the  Panama  Canal,  navy  yards  and  arsenals,  for  example — 
is  any  compensation  provided.  And  an  injured  employee  for 
whom  no  provision  is  made  in  the  law,  cannot — like  the  employee 
of  a  private  concern — sue  for  damages. 

Doctor  Rubinow  reports  in  the  Survey  seventeen  fatalities 
and  a  hundred  and  twenty- four  injuries  in  the  rural  mail  delivery 
service,  and  eight  fatalities  and  four  hundred  and  forty  injuries 
in  city  mail  delivery — for  none  of  which  was  a  cent  of  compen- 
sation paid.  Altogether  he  mentions  sixteen  hundred  injuries, 
three  hundred  and  ninety  of  them  fatal,  without  compensation ! 

On  a  like  record  from  the  Steel  Trust,  the  halls  of  Congress 
would  ring  with  denunciation — which  illustrates  again  that  the 
Government,  though  very  free  with  advice  to  others,  will  not 
conduct  its  own  business  decently. 

New  York  Telephone   Company. 

Some   Facts   Regarding  Government   Ownership   of   Telephones. 
Welfare   of  Employees. 

The  federal  Government  is  far  behind  the  privately  owned 
telephone  enterprises  in  caring  for  the  welfare  of  its  employees. 
It  provides — 

No  old  age  pensions. 

No  sick  benefits. 

No  death  benefits  or  insurance. 


TELEGRAPH   AND   TELEPHONE  175 

What  effect  will  government  ownership  of  the  telephone 
enterprise  have  upon  the  thousands  now  benefiting  from  these 
welfare  provisions  ? 

The  Bell  Telephone  Company  alone  has  been  awarded  four 
medals  by  international  expositions,  for  providing  healthful, 
pleasant  working  conditions  for  its  employees  and  caring  for 
their  present  and  future  welfare. 

Recently  the  Postmaster  of  New  York  City,  in  replying  to 
criticisms  that  women  were  not  given  employment,  stated  that 
the  conditions,  sanitary  and  otherwise,  in  the  New  York  Post 
Office  building,  made  it  an  unfit  place  for  women  to  work  in. 

How  long  would  a  privately  owned  public  utility  be  permitted 
to  maintain  such  conditions? 

The  Bell  Companies  alone  own  and  operate,  in  connection 
with  its  business,  equipment  to  the  value  of  $765,000,000. 

The  Post  Office  Department  does  not  own  even  the  post 
office  buildings  it  occupies ;  the  mail  cars  belong  to  the  railroads ; 
the  pneumatic  tubes,  in  cities  like  New  York,  and  even  the  mail 
wagons,  are  owned  and  operated  by  private  companies. 

The  construction  and  operation  of  the  vast  and  complex  tel- 
ephone system  is  an  entirely  different  problem  from  collecting 
and  delivering  the  mail. 

If  the  city  of  New  York  were  as  inadequately  supplied  with 
public  telephone  stations  as  it  is  with  mail  boxes,  and  the  Tele- 
phone Company  did  not  provide  additional  facilities  upon  com- 
plaint of  the  public,  the  company  would  be  properly  ordered  to 
do  so  by  the  Public  Service  Commission.  But  what  redress  has 
the  public  in  the  case  of  the'  Post  Office?  Complaints  of  lack  of 
letter  boxes  have  been  frequent  enough  during  the  past  years, 
but  no  result  is  apparent. 

In  the  winter  of  1913,  a  severe  sleet  storm  swept  over  the 
lake  region  from  Chicago  to  Buffalo,  causing  damage  amounting 
to  a  half  million  dollars. 

It  was  vitally  necessary  for  the  business  interests  of  this  sec- 
tion that  services  should  be  restored  at  the  earliest  possible 
moment. 

Thousands  of  men  and  trainloads  of  material  were  at  once 
rushed  to  the  affected  territory.  The  situation  was  quickly  met 
and  the  services  restored. 

Wire  using  companies  meet  such  crises  every  year.     No  red 


1 76  GOVERNMENT   OWNERSHIP   OF 

tape  has  to  be  unwound.    There  is  no  wait  until  Congress  passes 
an  emergency  appropriation. 

If  the  Government  takes  over  the  telephone  and  telegraph 
systems,  will  Congress  delegate  authority  to  the  Post  Office 
Department  to  spend  millions  for  emergency  demands  without  the 
customary  debate  and  delay  in  sending  appropriations  through 
the  usual  channels? 

Wall  Street  Journal  (New  York),     p.   i.     June  15,  1914. 

Editorial. 

Latest  figures  show  that  Washington,  D.  C,  has  the  highest 
per  capita  tax  of  any  city  in  the  United  States,  which  is  an 
unanswerable  argument  for  letting  Congress  do  everything. 

Concerning  Municipal  Ownership.    6:253-6.    November,  1913. 

Public  Ownership  Abroad.     Sydney  Brooks. 

The  Telephone  and  the  State 

"In  the  Bell  System  7,500,000  telephones  are  connected  and 
work  together  to  take  care  of  the  telephone  needs  of  the  people 
of  this  country." 

An  Englishman  can  only  gape  in  envy  and  amazement  at 
such  stupendous  figures.  They  mean  that  there  are  more  than 
twice  as  many  telephones  operating  under  a  single  system  in 
the  United  States  as  there  are  under  all  systems  and  all  com- 
panies in  the  whole  of  Europe.  Telephone  statistics  are  not 
easily  obtainable,  but  I  do  not  think  I  am  far  wrong  in  asserting 
that  there  are  about  16,000,000  telephones  in  existence  the  world 
over  and  that  of  these  North  America  (including  Canada  and 
the  West  Indies  and  Mexico)  accounts  for  nearly  12,000,000; 
Europe  for  slightly  over  3,000,000,  and  Asia,  Africa,  South 
America  and  Australasia,  for  about  500,000.  Roughly  speaking, 
over  two-thirds  of  the  world's  equipment  of  telephones  is  to  be 
found  in  the  American  Union. 

Of  the  cities  possessing  10,000  telephones  and  over,  consider- 
ably more  than  half  are  situated  in  the  United  States.  There 
are  at  least  fifty  American  towns  where  there  is  a  telephone  to 
less  than  every  ten  of  the  inhabitants;  in  Europe  there  is  only 


TELEGRAPH   AND   TELEPHONE  177 

one.  London,  with  a  population  more  than  three'  times  as  great 
as  Chicago,  has  fewer  telephones ;  Paris  is  twice  the  size  of 
Boston,  but  possesses  little  more  than  half  as  many  telephones ; 
Liverpool,  three  times  as  great  as  Los  Angeles,  has  only  a  little 
over  a  third  of  its  number  of  telephones;  Glasgow,  twice  the 
size  of  Cincinnati,  has  seven  thousand  fewer  telephones;  Bir- 
mingham with  a  population  of  over  half  a  million,  has  four  thou- 
sand fewer  telephones  than  Grand  Rapids,  with  a  population  of 
some  140,000;  Manchester  has  fewer  telephones  than  Louisville, 
though  it  is  over  four  times  as  big;  Moscow  has  fewer  than 
Seattle,  though  its  population  is  five  times  greater;  Vienna  with 
four  times  the  population  of  Detroit  has  twenty  thousand  fewer 
telephones;  Hamburg  has  ten  thousand  fewer  than  Cleveland, 
a  city  half  its  size;  Milan,  with  a  population  of  well  over  half 
a  million,  has  about  a  third  as  many  telephones  as  Omaha,  with 
a  population  of  160,000;  Breslau  is  considerably  over  four  times 
the  size  of  Spokane  and  yet  boasts  five  thousand  fewer  tele- 
phones; and  Amsterdam  with  a  population  of  nearly  600,000  .has 
fewer  than  Des  Moines  with  a  population  of  90,000. 

In  the  whole  of  the  United  Kingdom  there  are  only  about  as 
many  telephones  as  in  New  York  and  Chicago;  in  all  France 
there  are  fewer  than  in  Chicago  alone;  in  all  Russia  there  are 
fewer  than  in  Philadelphia ;  in  Austria  fewer  than  in  Boston ;  in 
Italy  fewer  than  in  Los  Angeles ;  in  Spain  fewer  than  in  Toledo, 
Ohio;  in  Belgium  fewer  than  in  Kansas  City;  and  in  Hungary 
fewer  than  in  Pittsburg.  We  may  take  the  figures  in  yet  another 
way.  Roughly  speaking  there  is  one  telephone  for  every  nine 
Americans.  If  the  same  proportion  obtained  in  Europe,  Den- 
mark would  have  three  times  as  many  telephones  as  she  actually 
possesses;  Sweden  three  and  a  half  times;  Norway  four  and  a 
half  times;  Switzerland  five  times;  Germany  six  and  a  half 
times;  Great  Britain  seven  and  a  half  times;  The  Netherlands 
eleven  times;  Belgium  nearly  eighteen  times  as  many;  France 
nineteen  times;  Austria  all  but  thirty  times;  Hungary  thirty- 
seven  times;  Italy  fifty-six  times;  Portugal  and  Spain  about 
ninety  times;  Russia  one  hundred  and  five  times,  and  Greece, 
Servia  and  Bulgaria  from  one  hundred  and  seventy  to  two 
hundred  and  four  times  as  many. 

Now  these  are  very  remarkable  figures.  Their  significance, 
perhaps,  may  best  be  judged  when  one  remembers  that  at  the 


i?8  GOVERNMENT   OWNERSHIP    OF 

time  the  telephone  was  invented  all  the  leading  industrial  na- 
tions were  equally  well  placed  for  developing  it  and  applying  it  to 
their  own  conditions.  The  United  States  had  no  natural  ad- 
vantages whatever;  it  had  on  the  contrary  the  disadvantage  of 
being  a  sparsely  settled  country,  contending  with  enormous 
distances.  Look  at  the  map  of  the  United  States  and  of  any 
European  country  and  you  would  say,  and  rightly  say,  that  it 
is  the  latter  and  not  the  former  that  lends  itself  most  easily  to 
being  connected  by  telephone,  the  towns  being  nearer  together, 
the  urban  population  proportionately  greater,  and  other  means 
of  communication  being  already  well  provided. 

Then  why  is  it  that  the  United  States  has  forged  so  con- 
spicuously ahead?  Is  it  that  the  Americans  as  a  people  are 
readier  to  adopt  a  new  invention  and  quicker  to  perceive  its 
possibilities?  Partly  that,  no  doubt.  Was  there  any  technical 
reason  why  the  utilization  and  expansion  of  the  telephone  should 
have  been  on  a  far  bigger  scale  in  America  than  in  Europe?  I 
know  of  no  such,  reason.  Some,  at  any  rate,  of  the  improve- 
ments that  have  made  the  telephone  a  practical  instrument  and  a 
profitable  business,  have  been  not  of  American,  but  of  British 
invention;  and  I  hardly  think  that  any  one  would  claim  for 
American  engineering  that  it  is  more  skillful  or  progressive 
than  the  magnificent  technique  and  inventive  genius  that  have 
given  France  the  lead  both  in  motor-cars  and  in  flying  machines. 

What,  then,  is  the  explanation?  For  the  superiority  of  the 
American  telephone  system  does  not  reside  in  numbers  merely. 
If  one  could  institute  a  comparison  between  the  efficiency  of  the 
telephone  services  provided  in  Europe  and  in  America,  the 
disparity  on  the  scientific  and  commercial  sides,  and  particularly 
from  the  standpoint  of  the  consumers'  convenience,  would  be 
found  to  be  even  greater.  Not  only  are  there  far  fewer  tele- 
phones in  Europe  than  in  the  United  States,  but  those  that  ex- 
ist are,  as  a  rule  and  as  every  traveler  has  learned  by  bitter 
experience,  almost  ludicrously  inferior  in  quality. 

There  are  great  and  famous  towns  in  Europe  at  this  moment 
where  a  plant  and  apparatus  of  the  kind  that  went  to  the  scrap- 
heap  in  America  twenty  years  ago  still  obtain ;  where  the  obsolete 
magneto  system,  long  ago  abandoned  in  the  United  States  for 
the  central  battery,  is  still  adhered  to ;  where  the  old  flat-rate 
scheme  of  tariffs  is  still  the  rule ;  and  where  the  single  exchange 


TELEGRAPH   AND   TELEPHONE  179 

district,  with  relatively  high  rates  for  distant  parts  of  the  town, 
still  holds  the  field;  while  throughout  the  length  and  breadth 
of  England  and  the  Continent  there  is  hardly  a  single  efficient 
long-distance  service  to  be  found. 

What  is  the  reason  for  this  extraordinary  contrast? 

Concerning  Municipal  Ownership.   6:277-80.   December,  1913. 

Public  Ownership  Abroad.     Sydney   Brooks. 
The  Telephone  and  the  State 

The  main  reason  for  the  almost  inestimably  higher  standard 
reached  by  the  United  States  in  every  department  of  the  tele- 
phone industry  is  that  in  America  it  has  been  left  free  to  expand 
in  its  own  way  and  without  official  restrictions,  while  in  Europe 
it  has  been  in  most  countries  a  state  monopoly.  Both  policies 
have  their  advantages,  and  both  their  disadvantages. 

The  American  people,  by  permitting  free  competition  in  tel- 
ephones, have  suffered  more  than  a  little  from  the  collision  of 
rival  companies  and  from  the  growth  in  some  parts  of  the 
country  of  two  or  more  systems,  each  supplying  the  same  lo- 
cality, but  refusing  to  one  another  any  cooperation  of  facilities. 
Furthermore,  now  that  the  laws  of  economic  consolidation, 
greatly  to  the  public  advantage,  have  brushed  aside  most  of  the 
confusion  of  earlier  days  and  have  resulted  in  bringing  the  bulk 
of  the  telephone  business  of  the  country  under  a  single,  unified 
control,  the  government  necessarily  finds  itself  confronted  with 
a  huge  corporation  that  practically  monopolizes  a  great  public 
utility. 

In  Europe,  on  the  other  hand,  this  situation  and  its  difficulties 
have  been  largely  avoided  by  making  the  telephone  from  the  first 
a  state  monopoly;  but  they  have  been  avoided  at  the  cost  of 
furnishing  the  public  with  a  meagre,  exasperating  and  totally 
inadequate  and  unprogressive  service. 

There  cannot  be  much  doubt  as  to  which  side  the  balance 
of  advantage  inclines.  The  more,  indeed,  one  inquires  into  the 
history  of  telephone  development  in  Europe,  the  more  con- 
vinced does  one  become  that,  while  a  monopoly  in  private  hands 
is  often  objectionable,  it  may  be  ten  times  more  objectionable  in 
the  hands  of  the  state,  and  that,  while  a  country  may  incur  some 


i8o  GOVERNMENT   OWNERSHIP   OF 

political  risks  if  a  public  utility  is  left  under  corporate  control, 
it  suffers  far  more  if  the  same  utility  is  furnished  by  the  state  in 
an  inefficient  and  unenterprising  form.  What  does  it  profit  an 
Englishman  like  myself,  grappling  daily  and  even  hourly  with  the 
embittering  inadequacies  of  the  London  telephone  system,  to  know 
that  it  is  a  government  possession?  A  well-run,  privately  owned 
monopoly  is  of  incomparably  greater  benefit  to  the  people  than  the 
same  monopoly  badly  run  and  owned  and  operated  by  the  state. 
And,  remember,  it  is  always  easier  to  bring  a  privately  managed 
utility  under  the  proper  supervision  of  the  government  than  it 
is  to  raise  a  state  department  to  the  ordinary  corporation  level 
of  business  ability. 

In  those  countries  of  Europe  where  the  telephone  has  not 
been  made  a  government  monopoly,  the  system  of  issuing  limited 
licenses,  terminable  at  the  end  of  a  fixed  and  usually  too  brief 
period  and  under  indefinite  conditions  as  to  the  repayment  of 
capital,  has  had  the  effect  of  hindering  the  flow  of  private  in- 
vestment. Moreover,  even  in  countries  where  the  telephone 
has  been  taken  over  by  the  state,  the  governments  have  shrunk 
from  putting  the  necessary  money  into  the  business.  All  the 
European  States  lose  money  on  the  workings  of  the  telegraphs, 
and  they  have  no  desire  to  incur  further  deficits  in  connection 
with  the  telephones.  But  if  the  American  companies  had  been 
afraid  to  pour  out  money  without  any  immediate  return,  if  they 
had  neglected  to  adopt  new  improvements  even  at  the  cost  of 
rebuilding  their  entire  plant,  if  they  had  hesitated  to  accumulate 
an  ample  margin  of  spare  facilities  over  and  above  the  demands 
of  the  day,  America  would  not  at  this  moment  enjoy  the  best 
telephone  service  in  the  world. 

Low  Rates  Are  Dear — at  the  Price  of  Efficiency 

In  almost  every  country  where  the  telephone  is  a  government 
monopoly,  you  will  find  that  it  has  not  been  carried  beyond  the 
tentative  and  experimental  phase  that  America  left  behind  two 
decades  ago.  More  rigid  and  with  less  initiative  than  private 
corporations,  hampered  by  political  considerations,  unwilling  to 
concentrate  responsibility,  less  disciplined  and  less  elastic  in 
their  organizations,  the  governments  of  Europe,  with  perhaps 
two  exceptions,  have  made  their  administration  of  the  telephone 


TELEGRAPH   AND   TELEPHONE  181 

a  synonym  for  all  that  is  wasteful  and  incompetent.  They  pride 
themselves  on  the  comparative  cheapness  of  their  subscription 
rates  and  call  rates.  But  a  cheap  service  that  is  inefficient  and 
backward  is  far  worse,  from  the  standpoint  of  the  public  welfare, 
than  a  dearer  service  that  is  prompt  and  can  always  be  depended 
on.  I  would  rather  any  day  spend  10  cents  (if  that  is  the 
charge)  in  New  York  and  be  sure  of  getting  the  number  I 
wanted,  and  of  getting  it  at  once,  than  waste  4  cents  in  London 
on  a  prolonged  babble  with  a  stupid  operator,  insufficient  lines, 
and  a  conversation — if  any  conversation  ensues — that  is  only 
audible  when  it  is  interrupted. 

Private  Enterprise  Hampered   by   the  Government 

What  is  the  history  of  the  telephone  in  Great  Britain?  It 
is.  the  history  of  an  invention  over  which  the  Government  from 
the  start  asserted  a  legal  monopoly,  but  the  practical  develop- 
ment of  which  it  leased  to  private  corporations  in  return  for 
a  10  per  cent  royalty  on  the  gross  receipts.  The  State  never 
showed  the  slightest  prevision  of  what  the  telephone  was  destined 
to  become,  or  of  how  it  ought  to  be  popularized,  or  of  the 
proper  policy  demanded  in  the  public  interests  for  its  regulation. 
It  began  in  the  usual  way  by  scoffing  at  the  new  invention, 
but  even  while  it  scoffed  it  sought  to  safeguard  itself  against 
the  possibility  that  it  might  some  day  compete  with  the  govern- 
ment's ownership  of  the  telegraphs.  It  threw  upon  private 
initiative  all  the  risks  of  the  new  enterprise,  reserving  to  itself 
the  right  to  expropriate  the  ultimate  profits.  It  failed  altogether 
to  realize  that  competition  in  telephones,  so  far  from  being  a 
protection,  was  really  a  betrayal  of  the  public  interests.  Ac- 
cordingly it  scattered  its  licenses  broadcast  and  encouraged  the 
municipalities,  always  with  disastrous  results,  to  exploit  the  new 
utility  for  themselves.  It  hampered  the  private  companies  in 
every  way  with  jealous  shortsightedness,  and  finally  it  employed 
its  irresistible  statutory  powers  to  buy  them  out  on  terms  that 
were  in  the  last  degree  ungenerous  and  oppressive.  After  im- 
peding them  at  every  turn  and  withholding  from  them  essential 
privileges  that  were  freely  granted  to  the  rival  municipal  enter- 
prises, it  then  used  their  inefficiency  and  unprogressiveness  as 
an  argument  for  public  ownership. 

15 


182  GOVERNMENT   OWNERSHIP   OF 

And  this,  more  or  less,  has  been  the  experience  of  the  tele- 
phone industry  in  all  the  chief  European  countries.  Can  it  be 
wondered  at  that  there  is  no  telephone  system  from  London  to 
Madrid  or  from  Madrid  to  St.  Petersburg  that  even  begins  to 
approach  the  excellence  of  the  service  that  obtains  all  over  the 
United  States? 

[Expanded  more  fully  in  North  American  Review.  195:  496- 
512.  April,  1912. — Ed.] 

New  York  Telephone  Company. 

Some   Facts   Regarding    Government   Ownership  of   Tele- 
phones, p.  56. 

It  is  a  significant  fact  that  the  most  successful  telephone  sys- 
tem in  Europe  is  operated  by  a  private  company  in  the  capital  of 
Denmark.  Note  the  following  comparison  between  it  and  the 
state  owned  companies  in  other  European  cities  of  the  same  size : 

Telephones  per 

Population  100  Population 

Copenhagen,  Denmark   608,000  8.4 

Munich,  Germany   606,000  5.5 

Leipsic,   Germany   617,000  4.6 

Dresden,  Germany 558,000  4.3 

Marseilles,  France    565,000  1.4 

Lyons,   France    547,000  1.3 

Antwerp,    Belgium    487,000  1.6 

Naples,  Italy   723,000  .5 

Budapest,  Hungary   880,000  2.8 

What  the  English  People  Think  of  Their  National  Telephone. 

Based  Upon  Special  Correspondence  and  Selected  Letters 
Addressed  to  and  Published  by  the  Times  (London)  During 
the  Month  of  December,  1913. 

Results  of  Efficient  Service 

There  is  no  doubt  that  the  superiority  of  the  American  system 
has  been  attained  in  a  great  measure  by  administrative  ability  in 
its  organizers  and  the  wide  field,  of  opportunity,  with  few  serious 
obstacles  of  competition,  in  which  they  have  worked.  Their  out- 
look has  been  steadily  national,  not  parochial.  They  have  realized 
that  defective  telephonic  communication  is,  in  every  sense,  bad 
business,  and  that  the  factors  constituting  good  service,  in  the 
order  of  their  importance,  are  (i)  speed  and  accuracy  in  securing 


TELEGRAPH   AND   TELEPHONE  183 

connections ;  (2)  volume  and  clearness  of  sound  transmitted ;  and 
(3)  cost.  They  have  realized  that  the  money  value  of  the  time 
and  temper  wasted  by  the  public  over  a  bad  service  is  a  far  more 
serious  consideration  than  any  reasonable  charges  imposed  for  a 
good  one,  and  they  have  therefore  proceeded  on  the  principle  that 
speed  and  reliability  are  more  important  than  cheapness.  Further- 
more, Mr.  Vail's  civic  ideals  have  been  applied,  with  loyalty  and 
enthusiasm,  throughout.  Esprit  de  corps,  and  a  spirit  of  emula- 
tion between  exchanges,  are  encouraged  to  the  utmost.  One  of 
the  best  features  of  the  telephone  business  as  organized  in  Amer- 
ica is  the  public  appreciation  of  the  staff's  keenness,  its  "team 
work,"  and  pride  in  efficiency. 

Under  such  conditions  the  public  service  retains  its  human 
interest — no  small  factor  in  smooth  working — and  the  "telephone 
habit"  becomes  easily  explicable.  In  January,  1911,  the  number 
of  telephones  in  New  York  was  equal  to  the  combined  totals 
of  London,  Paris,  and  Berlin. 

Failure  of  Government  Control 

In  Great  Britain  the  history  of  telephone  legislation  has  per- 
sistently reflected  the  vacillations  of  immature  opinion,  and  the 
varying  attitude  of  permanent  officials,  of  the  Post  Office,  and  the 
Treasury.  Further  causes  of  disorganization  lie  in  the  relaxation 
of  discipline  and  esprit  de  corps  consequent  upon  the  transfer  of 
the  telephone  company's  personnel  to  the  Post  Offise ;  in  the  jeal- 
ousies and  friction  between  old  employees  and  new,  all  tending  to 
impair  smooth  working;  above  all,  in  the  technical  telephone 
staff's  recognition  of  the  fact  that  under  the  cast-iron,  water-tight 
compartment  system  of  Post  Office  tradition  there  is  little  or  no 
scope  for  intelligent  individual  initiative  and  scant  prospect  of 
applying  business  methods  to  the  development  of  what  should  be 
a  rapidly  expanding  commercial  undertaking,  managed  by  the  best 
technical  and  financial  talent  obtainable. 

There  are  many  experts  qualified  to  speak  with  authority  on 
this  question  who  share  the  views  expressed  by  Lord  Desborough, 
as  president  of  the  London  Chamber  of  Commerce,  on  May  18, 
1911.  He  said: 

Many  chambers  of  commerce  besides  the  London  Chamber  had  dis- 
cussed the  subject,  and  they  were  unanimously  of  opinion  that  it  would 
be  very  much  better  for  the  telephone  service  of  this  country  to  be  in 


184  GOVERNMENT   OWNERSHIP    OF 

the  hands  of  a  board  of  experts  than  to  hand  it  over  to  a  government 
department.  .  .  .  Business  men  would  like  to  see  an  independent 
authority  formed,  somewhat  on  the  lines  of  the  Port  of  London  Authority, 
or  in  any  case  formed  of  business  men  and  of  experts,  with  sufficient 
Government  representation.  Such  men  would  be  alive  to  the  needs  of  the 
business  community  and  accessible  to  representations  from  them,  and  would 
bring  the  telephone  service  of  this  country  up  to  the  requirements  of 
the  nation. 

Problem  of  the  Executive — Faults  and  Limitations 

It  is  widely  acknowledged  that  the  telephone  system  in  this 
country  was  not  properly  developed  during  the  period  before  it 
became  a  Post  Office  monopoly,  and  is  not  being  properly  devel- 
oped at  the  present  moment. 

Under  the  National  Telephone  Company  the  organization  was 
hampered  and  progress  hindered  by  the  restrictions  imposed  by 
the  Post  Office — that  is  to  say,  by  the  Government — and  by  the 
imminence  of  the  expiry  of  the  company's  license.  Under  the 
Post  Office,  as  matters  stand  at  present,  even  if  ground  has  not 
been  lost,  the  rapid  advance  that  is  a  vital  commercial  necessity 
to  the  country  is  not  being  made,  for  the  simple  reason  that  a 
Government  Department  is,  to  judge  from  experience,  unable  to 
carry  on  a  great  profit-making  commercial  concern  on  a  sound 
business  basis.  During  both  periods,  therefore,  the  telephones 
and  the  public  have  suffered,  and  still  are  suffering,  from  the 
influence  of  government  control. 

The  Post  Office  authorities,  as  the  result  of  a  series  of  obser- 
vations which  are  continually  being  carried  out  without  the 
knowledge  of  the  operators,  claim  that  the  proportion  of  errors 
is  in  nearly  all  cases  being  annually  reduced.  But  that  is  cold 
comfort  to  the  subscriber  who  knows  by  personal  experience  that 
he  cannot  depend  on  obtaining  a  satisfactory  service.  He  wants 
to  know  why  defects  in  communication  occur  at  all.  The  answer 
is  that  a  certain  proportion  of  them  are  unavoidable.  It  must 
happen  sometimes  that  a  number  is  engaged  or  that  no  reply  is 
given.  On  the  other  hand,  the  fact  remains  that  in  America  the 
exchanges,  with  practically  the  same  equipment  as  is  used  in 
London,  are  able  to  give  their  subscribers  a  much  more  prompt 
and  efficient  service,  as  a  matter  of  practical  certainty.  The 
shortcomings  of  operators  in  this  country  must  not,  therefore,  be 
attributed  entirely  to  the  arduous  and  harassing  nature  of  their 
work. 


TELEGRAPH   AND   TELEPHONE  185 

The  root-fault  appears  to  lie  in  the  system,  in  the  conduct  of 
the  telephone  business  by  a  government  department  instead  of  by 
private  enterprise.  The  operators,  to  begin  with,  are  civil  ser- 
vants;  their  position  is  assured.  They  cannot  be  punished  for 
carelessness  as  they  would  be  by  a  private  company,  and  they  are 
practically  secure  against  dismissal.  Many  of  them  are  also 
affected  by  discontent  with  regard  to  their  salaries  and  chances  of 
promotion.  This  is  especially  the  case  with  senior  operators 
transferred  from  the  company  to  the  Post  Office  and  placed  on  a 
level  with  their  juniors.  These  two  factors  of  the  situation  are 
sufficient  in  themselves  to  account  for  a  large  number  of  the 
executive  mistakes  of  which  the  public  complain.  It  is  not  in 
human  nature  to  work  harder  or  with  greater  care  than  the 
minimum  necessary  to  ensure  permanent  occupation  in  a  well-paid 
post,  arid  personal  discontent  must  to  a  certain  extent  have  a  dis- 
turbing effect  on  the  morale,  and  therefore  the  work,  of  the 
operator. 

Criticism  of  Administrative  Methods — Complaints  and  Suggestions 

It  is  the  duty  of  the  Post  Office  authorities  to  run  the  telephone 
service  at  as  low  a  cost  as  is  possible  with  a  due  regard  to 
efficiency.  In  practice  this  means  that  they  have  to  study  the 
requirements  of  the  Treasury  rather  than  the  real  interests  of  the 
public.  With  a  private  company  the  case  is  different.  The  direc- 
tors have  to  satisfy  their  shareholders.  They  are  out  to  make 
dividends,  and  they  know  that  unless  they  give  the  public  what 
it  wants  they  cannot  hope  to  make  their  undertaking  a  paying 
concern.  The  telephone  service,  that  is  to  say,  if  it  is  to  satisfy 
the  needs  of  the  country,  must  be  run  on  commercial  lines. 
Otherwise,  as  in  the  case  of  the  telegraphs,  it  is  practically  bound 
to  result  in  a  huge  annual  loss,  a  state  of  affairs  which  will  cer- 
tainly not  make  for  the  necessary  development  and  efficiency  in 
operation. 

One  of  the  first  essentials  of  the  successful  conduct  of  a  busi- 
ness enterprise  is  that  the  staff  should  be  not  only  competent,  but 
contented.  It  is  to  be  feared  that  from  the  operators  upwards 
the  state  of  affairs  in  the  ranks  of  the  Post  Office  telephone 
employees  is  rather  the  other  way.  Amongst  the  junior  grades 
there  is  much  dissatisfaction  with  regard  to  questions  of  hours, 
wages,  increments,  and  allowances,  especially  owing  to  the  fact 


i86  GOVERNMENT   OWNERSHIP    OF 

that  practically  all  the  senior  operators  transferred  from  the  com- 
pany are  receiving  less  pay  than  some  of  their  juniors  who  en- 
tered the  Post  Office  service  direct. 

Stagnation  in  Promotion 

Another  grievance  is  the  undue  proportion  of  senior  engi- 
neering posts  in  the  telephone  service  which  were  allotted  to  Post 
Office  engineers  whose  experience  was  limited  to  telegraph  work. 
Lastly,  on  more  general  lines,  senior  officers  who,  prior  to  the 
transfer,  had  comparatively  wide  powers,  now  find  the  lack  of 
authority  and  power  to  take  responsibility,  which  is  the  rule  of 
the  system,  extremely  irksome.  Every  little  matter  has  to  be 
referred  to  headquarters  for  sanction  before  being  dealt  with,  and 
the  consequent  delay  tends  to  cause  inefficiency  and  slackness. 

That,  indeed,  must  inevitably  be  the  cumulative  effect  of  these 
various  causes  of  discontent.  In  view  of  the  general  hopelessness 
of  the  outlook  for  the  engineering,  and  especially  the  expert  and 
electrical  staff,  some  300  of  the  best  of  the  younger  men  trained 
by  the  company  left  the  service  to  take  up  positions  elsewhere; 
many  of  them  have  since  succeeded  in  obtaining  managerships 
and  chief  engineer's  and  electrician's  positions  with  foreign  and 
colonial  telephone  companies,  and  senior  positions  in  the  employ 
of  big  manufacturers  of  telephone  equipment. 

Post  Office  Methods 

In  taking  over  the  telephones  from  the  company,  the  Post 
Office  dispensed  entirely  with  the  service  and  advice  of  its  chief 
officials,  the  president  and  board  of  directors.  In  other  words, 
doubtless  from  motives  of  economy,  the  Department  was  deprived 
of  the  assistance  of  the  country's  most  experienced  body  of  tele- 
phone experts.  The  service  is  now  entirely  administered  by  the 
Secretary's  Department,  both  as  regards  its  commercial  and  its 
engineering  sides.  As  the  Secretary's  Department  has  also  to 
administer  the  whole  of  the  other  vast  undertakings  of  the  Post 
Office,  including  the  postal,  telegraph,  money  order,  savings  bank, 
insurance,  and  other  sections,  it  can  only  devote  a  limited  amount 
of  the  time  of  its  senior  officers  to  the  telephone  service.  All  ques- 
tions relative  to  the  service,  as  such,  and  to  developments  for 
future  requirements  of  the  public,  the  renewal  of  plant,  and 
other  highly  technical  matters,  which  in  America  are  considered 


TELEGRAPH   AND   TELEPHONE  187 

and  settled  by  experts  with  life-training  in  telephone  work,  are 
in  this  country  dealt  with  by  the  principal  clerks  of  the  Secretary's 
Department. 

The  system  is  controlled  by  men  whose  only  business  training 
has  been  picked  up  in  the  Post  Office  itself,  who  are  necessarily 
ignorant  of  modern  business  methods  as  known  to  commercial 
concerns.  Many  of  the  labour-saving  devices  and  methods  in 
every-day  use  in  all  good  commercial  houses  are  not  even  now 
employed.  Instead  of  them  the  Post  Office  affects  the  old- 
fashioned  press  copying-book  and  the  snowball  system  of  queries 
and  replies,  which  grow  and  grow  and  only  lead  to  practical 
action  after  a  long  period  of  delay,  if  indeed  they  do  not  pass  into 
oblivion. 

Great   Britain.    Parliamentary   Debates,   Official   Report, 
June  19,  1911.     p.  52. 

Postmaster  General  Herbert  Samuel. 

We  have  been  closely  watching  the  development  of  the  tele- 
phone system  in  the  United  States — the  country  which  was  its 
original  home,  and  where  it  has  reached  its  highest  development. 
For  many  years  representatives  of  my  Department  have  been 
visiting  the  United  States  in  order  to  acquire  information  there. 
The  head  of  the  telephone  branch  of  the  Post  Office  has  been  to 
the  United  States,  and  the  chief  engineer  has  also  made  an 
exhaustive  study  of  the  telephone  system  there.  The  telephone 
traffic  manager  has  only  just  returned.  We  have  established  a 
system  of  travelling  scholarships  for  Post  Office  engineers  which 
will  enable  them  to  go  over  to  the  United  States  for  considerable 
periods  in  order  to  make  a  minute  study  of  the  telephone  in  that 
country. 

Great     Britain.      Parliamentary     Debates,     Official     Report, 
June  19,  1911,  p.  86. 

Mr.  Morton. 

I  am  sorry  to  hear  today  that  the  Americans  are  so  far  in 
advance  of  us  in  this  matter  of  the  telephone.  We  pride  ourselves, 
I  suppose,  on  being  as  much  advanced  as  other  people,  but  it  is 
worth  while  bearing  in  mind,  now  we  are  told  that  the  Americans 


i88  GOVERNMENT   OWNERSHIP    OF 

are  a  long  way  in  advance  of  us  in  their  telephone  service,  that 
the  service  there  is  under  a  private  company  and  that  they  are 
obliged  to  look  after  their  customers  better  than  a  government 
department. 

Daily  Mail  (London).  January  2,  1914. 

Editorial. 

Why  is  it  that  government  ownership  and  management  of  the 
telephones  is  practically  always  a  failure?-  Why  is  it  that  for 
every  thousand  Europeans  there  is  only  one  telephone,  while  for 
every  thousand  Americans  there  are  fifteen?  Why  is  it  that  the 
country  which  has  done  most  to  improve  the  telephone,  both 
technically  and  commercially,  and  to  popularise  its  use  is  the 
country  in  which  its  operation  and  development  have  been,  and 
still  are,  exclusively  the  work  of  private  enterprise?  Why  is  it 
that  not  one  of  the  innumerable  discoveries  that  have  transformed 
the  telephone  industry  in  'the  last  thirty  years  has  emanated  from 
a  Department  of  State,  that  European  Governments  have  been  the 
last  to  adopt  them,  and  that  the  verdict  which  experts  are 
obliged  to  pass  upon  them,  with,  perhaps,  two  partial  exceptions, 
is  that  they  have  not  learned  their  business?  Why  is  it  that  there 
are  great  and  famous  towns  in  Europe  at  this  moment  where 
methods  and  machinery  that  were  abandoned  twenty  years  ago  in 
America  are  still  in  use?  Why  is  it  that  throughout  the  length 
and  breadth  of  Great  Britain  and  the  Continent  hardly  a  single 
efficient  long-distance  service  is  to  be  found?  Why  is  it  that  in 
New  York  one  can  invariably  get  the  number  one  wants,  and  get 
it  at  once,  while  in  London  one  has  often  to  wage  .a  prolonged 
and  embittering  battle  with  a  slow  operator,  insufficient  lines,  and 
a  conversation — if  any  conversation  ensues — that  is  only  audible 
when  it  is  interrupted? 

The  broad  answer  to  all  these  questions  is  that  the  alertness 
and  enterprise  that  are  essential  to  telephone  development  cannot 
be  expected  from  a  government  department.  The  characteristics 
of  the  bureaucratic  mind  and  temperament  forbid  it.  The 
organisation  of  a  government  office,  with  a  virtually  irremovable 
staff,  forbids  it.  The  spirit  of  officialdom,  with  its  traditions  of 
subordination,  its  narrow  professional  outlook,  its  unwillingness 
to  concentrate  responsibility,  its  insensible  stifling  of  initiative, 


TELEGRAPH   AND   TELEPHONE  189 

forbids  it.  A  government  department  cannot  raise  and  discipline 
its  staff  to  the  same  level  of  efficiency  as  a  commercial  company ; 
it  cannot  act  with  the  same  freedom  and  directness  as  a  private 
board;  it  cannot  pursue  a  business  object  without  deference  to  a 
hundred  influences  and  considerations  that  have  nothing  to  do 
with  business;  it  cannot  advertise  with  anything  like  the  same 
boldness;  it  naturally  seeks  efficiency  through  economy  instead 
of  economy  through  efficiency;  it  has  to  think  of  politics  and 
political  reactions ;  its  whole  constitution  prevents  it  from  proving 
as  enterprising  as  private  initiative,  as  prompt  to  discard  obsolete 
methods  and  apparatus,  as  quick  to  adopt  new  inventions,  as 
skilful  and  aggressive  in  gathering  in  subscribers. 

As  we  all  know  to  our  cost,  we  have  government  ownership 
and  operation  of  the  telephones  in  Great  Britain.  We  shall  never 
have  a  telephone  system  worthy  of  the  name  so  long  as  the  Post 
Office  remains  in  undivided  and  despotic  control.  Sooner  or  later, 
that  authority  must  be  modified  or  delegated  if  our  telephone 
system  is  ever  to  attain  an  even  passable  standard  of  efficiency. 

Public  Ownership  and  the  Telephone  in  Great  Britain,  p.  349- 

Hugo  Richard  Meyer. 

The  municipal  and  national  statesmen  know  that  the  taking 
hold  of  an  invention  always  is  a  speculation,  and  oftentimes  is  a 
gamble.  They  will  not  speculate  with  the  public  funds,  no  matter 
how  legitimate  the  cause;  for  failure  would  give  their  political 
opponents  too  good  an  opportunity  to  ride  into  power.  They 
know  also  that  the  pioneer  work  of  upbuilding  a  new  industry 
can  be  undertaken  only  by  men  who  are  in  the  position  to  act 
with  an  eye  single  to  the  business  aspects  of  their  venture ;  that  it 
cannot  be  undertaken  by  men  whose  first  business  ever  must  be 
to  consider  the  exigencies  of  politics. 

But  although  the  state  and  the  municipality  cannot  upbuild  a 
new  industry,  they  have  enunciated  and  enforced  the  doctrine 
that  when  an  industry  is  "ripe,"  it  must  be  made  to  fall  into'  "the 
public's  lap."  They  have  established  the  doctrine  that  the  public 
may  take  the  "ready  made"  industry  at  the  cost  of  the  replace- 
ment of  the  plant,  and  with  no  allowance  to  the  industrial  pioneer 
for  past  losses  or  the  prospects  of  future  profits.  Reduced  to 
simple  terms,  this  doctrine  is,  that  the  industrial  pioneer  renders 
society  no  service  for  which  society  ought  to  pay  him.  In  its 


igo  GOVERNMENT   OWNERSHIP   OF 

effect,  it  is  one  of  the  greatest  blows  at  industrial  progress  that 
ever  any  public  authority  has  struck  in  Great  Britain.  For  the 
doctrine  destroys  private  initiative,  which  public  initiative  cannot 
replace. 

New  York  Telephone  Company. 

Good    Service   to   the    Public    Is    Best   Secured   by   Government 
Regulation,  not  by  Political  Management. 

Telephone  Employees  in  England  Say  the  Government  is  not  a 
Good  Employer 

Telephone  workers  taken  over  by  the  British  Government  when 
it  purchased  the  National  Telephone  Company  met  recently  at 
Manchester,  England,  to  protest  against  their  experiences  as 
government  employees.  They  declared  that  the  Government  has 
broken  its  promises  to  them,  has  underpaid  them  and  has  made 
promotions  on  the  ground  of  favoritism  and  not  service. 

The  Manchester  Chronicle   (Eng.)  says: 

The  "ideal  employer"  is  in  many  cases  demanding  lower  wages  and 
longer  hours  than  the  old  company  found  necessary  to  successfully  work 
the  system. 

When  the  company's  employees  were  taken  over,  promotion  was 
promised  on  the  basis  of  work  done,  but  despite  the  fact  they  had 
had  in  their  hands  an  overwhelming  proportion  of  the  telephone  exchanges 
and  lines  throughout  the  country,  very  few  of  the  superior  positions  have 
been  given  to  them.  Out  of  357  appointments  in  the  engineering  depart- 
ment alone,  all  but  44  have  been  given  to  men  previously  employed  by 
the  Post  Office.  Here,  again,  we  have  an  example  of  broken  promises  and 
favoritism  unworthy  of  this  "model  employer." 

The  hardship  in  this  case  is  increased  by  the  fact  that  the  company's 
employees  had  no  say  in  the  matter  of  transfer  and  the  majority  would 
have  been  delighted  if  the  state  had  not  annexed  them.  Neither  are  the 
public  any  better  pleased  with  the  change,  and  the  net  result  of  the 
transfer  has  been  another  proof  of  the  unsatisfactory  character  of  the 
much-vaunted  state  service. 

Government  Ownership  and  Operation  of  Telephones  in  the 
Province  of  Manitoba,  Canada,    pp.  3-9. 

The  Policy  of  Government  Ownership  of  Telephones  Presented 

to  the    People. 

Hon.  R.  P.  Roblin,  Premier  of  Manitoba,  speaking  at  Nor- 
wood, November  23d,  1905,  said: 

The    Government    is    now    prepared    to    recommend    to    the    legislature, 


TELEGRAPH   AND   TELEPHONE  191 

the  establishment  of  a  telephone  system  in  the  Province  of  Manitoba, 
to  be  owned  and  controlled  by  the  municipalities  and  the  Government 
jointly,  as  may  be  found  most  advantageous  to  both. 

The  price  of  telephones  should  be  made  so  low  that  laboring  men 
and  artisans  can  have  the  benefit,  convenience  and  advantage  of  the 
telephone  as  well  as  the  merchant,  the  professional  man  and  the  gentleman 
of  wealth  and  leisure,  and  it  is  our  intention  to  recommend  to  Parliament 
a  proposition  of  this  kind  with  a  view  of  giving  a  telephone  system  to  all 
classes  at  cost. 

At  the  ensuing  session  of  the  Provincial  Legislature  a  Special 
Committee  was  appointed  to  investigate  the  proposition  for 
Government  Telephone  System  for  the  Province.  This  Com- 
mittee (Hon.  Colin  H.  Campbell,  Chairman),  reported  that 
"independent  telephone  service  could  cut  the  Bell  Telephone  rates 
in  two  and  still  make  a  profit."  [Journal  of  the  Manitoba 
Legislature,  1906,  p.  88.] 

Hon.  Colin  H.  Campbell,  speaking  in  the  Legislature,  March, 
1906,  in  support  of  the  report  of  the  Special  Committee,  as 
reported  in  the  Winnipeg  Telegram,  said  that  "so  far  as  the 
operation  by  the  Government  or  the  Municipality  was  concerned, 
the  rates  of  the  Bell  Telephone  Company  should  be  more  than  cut 
in  two" 

Hon.  Colin  H.  Campbell,  Attorney  General,  at  the  Convention 
of  the  Canadian  Independent  Telephone  Association,  September 
5th,  1906,  said,  "The  Government  of  our  province  will  be  able  to 
accomplish  a  result  that  will  cut  the  cost  of  the  telephone  in  two 
and  will  give  them  much  better  service  than  they  have  heretofore 
enjoyed." 

Hon.  Colin  H.  Campbell,  Attorney  General,  in  an  interview 
published  in  the  Winnipeg  Telegram,  December  loth,  1906,  said : 
"In  the  country,  the  reduction  will  be  one-half  the  existing  rates." 

Hon.  R.  P.  Roblin,  Premier,  as  quoted  in  the  Winnipeg 
Telegram,  December  nth,  1906,  said:  "It  is  simply  a  matter  of 
those  who  use  telephones  paying  for  them,  and  also  only  to  pay 
half  what  the  Bell  Telephone  now  charges" 

Three  or  four  days  later,  in  an  interview  published  in  the 
Winnipeg  Telegram,  Premier  Roblin  said :  "We  will  more  than 
cut  the  Bell  figures  in  two." 

Premier  Roblin,  speaking  at  Neepawa,  December  2oth,  1906, 
(as  reported  in  the  Winnipeg  Telegram  of  December  2ist),  said 
that  one  year  from  that  time  "they  would  be  able  to  speak  over 
a  government-owned  long  distance  line  from  Neepawa  to 


192 


GOVERNMENT   OWNERSHIP   OF 


Winnipeg  at  less  than  half  what  is  charged  by  the  Bell  Telephone 
Company  at  the  present  time." 

In  ^  an  official  pamphlet  addressed  "To  the  Electors  of 
Manitoba,"  issued  in  the  autumn  of  1906  by  the  Manitoba 
Government  in  support  of  their  policy  of  government  ownership 
of  telephones,  the  following  table  was  included  in  which  the 
long  distance  rates,  as  they  would  be  under  government  owner- 
ship, were  set  forth  in  contrast  with  the  rates  then  existing  on 
the  Bell  lines  : 

LONG  DISTANCE  CHARGES  FOR  THREE-MINUTE  CONVERSATION 


The  Gov't 

charges 

will  not 

Present 

exceed 

Bell 

these 

rates. 

rates. 

$  .30 

$  .10 

.50 

.15 

.40 

.15 

.50 

.20 

.50 

.25 

.50 

.25 

.60 

.35 

.60 

.35 

.75 

.35 

.75 

.40 

.75 

.40 

.75 

.40 

.75 

.45 

.90 

.50 

1.05 

.60 

1.20 

.65 

From  Winnipeg  to —  Miles. 

Eli 31 

High  Bluff 48 

Morris 42 

Dominion  City 56 

Emerson 66 

Macgregor 77 

Darlingford 94 

Cypress  River 95 

Pleasant  Point 100 

Hallsboro Ill 

Lariviere 113 

Douglas 121 

Eden 131 

Kenney 141 

Elgin 168 

Whitewater 192 

In  an  official  pamphlet  entitled  "The  Manitoba  Government  & 
Public  Ownership  of  Telephones,"  farmers  were  promised  service 
for  $12.00  per  annum,  instead  of  $24.00  as  charged  by  the  Bell 
Telephone  Company. 

A  plebiscite  of  the  ratepayers  of  the  Province  was  taken  at 
the  municipal  elections,  .December  I7th,  1906.  The  question  was 
submitted  to  the  electors  of  each  municipality:  "Shall  this 
municipality  own  and  operate  its  own  telephone?"  In  fifty-five 
of  the  one  hundred  and  twenty-eight  municipalities  in  the  Province 
the  answer  given  by  the  electors  was  "Yes,"  while  in  sixty-eight 
municipalities  the  answer  was  "No." 

Yet  this  result  was  assumed  by  the  Provincial  Government 
of  Manitoba  to  be  a  mandate  to  acquire,  either  by  purchase  or 
construction,  a  provincial  telephone  system. 

On  January  1st,  1908,  Premier  Roblin,  in  an  interview  pub- 
lished in  the  Winnipeg  papers,  announced,  "We  have  purchased 


TELEGRAPH   AND   TELEPHONE  193 

the  Bell  System  in  the  Province  of  Manitoba  for  $3,300,000,  and 
have  also  purchased  $100,000  worth  of  supplies  and  equipment. 
We  hope  to  take  charge  on  January  i5th.  We  shall  operate  the 
system  by  a  Commission  which  will  be  free  from  all  partyism. 
We  shall  issue  to  the  Bell  Company,  debentures  payable  in  forty 
years,  at  par  and  bearing  interest  at  four  per  cent. 

"We  purchased  the  Bell  system,"  said  the  Premier,  "for  the 
purpose  of  avoiding  the  necessity  of  having  a  dual  telephone 
system  in  the  Province,  and  in  that  way  preventing  the  waste  of 
several  millions  of  dollars  of  capital  as  well  as  the  extra  cost  to 
the  telephone  user.  I  believe,  also,  that  it  is  a  good  commercial 
proposition  and  whatever  profit  there  is  in  the  operation  of  the 
telephone  system  from  this  time  on  will  belong  to  the  people  of 
Manitoba  rather  than  to  a  private  company.  I  am  also  proud 
of  the  fact  that  we  have  been  able  to  secure  for  the  people  of 
Manitoba  the  first  complete  system  of  government-owned  tele- 
phones on  the  continent  of  North  America ;  and  am  sure,  from 
the  information  that  has  been  secured,  that  the  result,  as  years  go 
by,  will  prove  more  and  more  beneficial  to  the  people." 

.  March  ist,  1908,  six  weeks  after  taking  over  the  Bell  System, 
the  Government  Commission  announced,  through  a  circular  issued 
by  the  Winnipeg  agent,  that  the  rate  previously  charged  to 
doctors  and  nurses  in  the  City  of  Winnipeg  was  raised  from 
$40.00  to  $50.00  per  annum  for  unlimited  service.  (See  Winnipeg 
Free  Press,  February  2ist,  1908.) 

That  the  Government  of  Manitoba  in  considering  the  proposi- 
tion of  government  ownership  of  telephones  were  misled  by  the 
man  whom  they  employed  to  give  them  expert  information  and 
advice  was  publicly  admitted  by  Hon.  R.  P.  Roblin,  Premier, 
who,  in  addressing  the  Legislature  on  February  I4th,  1908,  one 
month  after  the  purchase  of  the  Bell  Telephone  Company's  plant, 
said:  "He  claimed  he  was  a  telephone  expert,  that  he  had 
knowledge  that  would  prove,  and  which  if  put  into  effect  would 
establish  a  system  of  telephones  not  only  cheaper  but  much 
better  in  service  than  that  of  the  Bell.  We  did  not  know  anything 
about  telephones  and  we  admit  it.  He  told  a  very  smooth  story 
and  to  listen  to  him  you  would  almost  be  persuaded  he  knew 
what  he  talked  about.  We  retained  him,  but  as  soon  as  it  came 
down  to  actual  construction  and  purchase  and  dealing  in  material 
we  found  the  man  knew  nothing  about  it  and  we  were  compelled 


194  GOVERNMENT   OWNERSHIP    OF 

to  dismiss  him."  In  the  same  speech  the  Premier  admitted  the 
Government  had  no  reliable  data  as  to  what  rates  should  be 
charged  for  telephone  service.  He  said:  "There  is  no  set  of 
figures  available  in  so  far  as  expenditure  is  concerned.  Twelve 
months  from  today  we  shall  be  able  to  discuss  it  intelligently 
because  we  shall  have  a  report." 

February  26th,  1909,  party  line  service  was  introduced  in  the 
schedule  of  rates  for  Winnipeg,  Portage  la  Prairie  and  Brandon, 
individual  lines  being  used  exclusively  previous  to  that  date. 
There  was  also  a  reduction  in  the  residence  rates  in  Winnipeg  of 
$5.00  per  annum,  in  medium  exchanges  of  $4.00  and  smaller 
exchanges  of  $3.00  per  annum. — Free  Press  schedule,  February 
26th,  1909. 

Rural  line  service  was  also,  reduced  from  $24.00  to  $20.00  and 
$30.00  to  $25.00,  but  it  was  stipulated  that  farmers  would  be 
required  to  build  at  their  own  expense  from  the  highway  to  their 
residences,  this  expense  having  formerly  been  assumed  by  the 
Bell  Company.— Free  Press,  April  i5th,  1908. 

In  giving  evidence  before  the  Public  Accounts  Committee  of 
the  Manitoba  Legislature  on  March  2d,  1910,  Mr.  F.  C.  Paterson, 
Chairman  of  the  Telephone  Commission,  stated  that  "a  $20.00  rate 
for  rural  service  was  a  losing  one,  stating  that  the  reduction  from 
$24.00  to  $20.00  was  made  by  the  Government,  and  not  by  the 
Telephone  Commissioners." 

On  May  ist,  1911,  the  Manitoba  Telephone  Commission 
announced  that  the  "half  rate"  for  conversations  over  the  long- 
distance lines,  between  6  p.  m.  and  6  a.  m.  was  abolished  and 
that  the  three-minute  basis  of  charge  for  long-distance  conversa- 
tion was  reduced  to  a  two-minute  basis,  the  following  being  the 
new  schedule: 

15  miles  or  less — 10  cents  for  two  minutes,  5  cents  each 
additional  minute. 

15  to  20  miles — 15  cents  for  two  minutes,  5  cents  each 
additional  minute. 

20  to  30  miles — 20  cents  for  two  minutes,  10  cents  each 
additional  minute. 

30  to  50  miles — 25  cents  for  two  minutes,  10  cents  each 
additional  minute. 

50  to  70  miles— 30  cents  for  two  minutes,  15  cents  each 
additional  minute. 


TELEGRAPH   AND   TELEPHONE 


195 


70  to  100  miles — 40  cents  for  two  minutes,  20  cents  each 
additional  minute. 

100  to  130  miles — 50  cents  for  two  minutes,  20  cents  each 
additional  minute. 

130  to  160  miles — 60  cents  for  two  minutes,  30  cents  each 
additional  minute. 

160  to  190  miles — 70  cents  for  two  minutes,  35  cents  each 
additional  minute. 

In  a  partial  analysis  of  these  rates,  the  Manitoba  Free  Press 
of  April  I3th,  1910,  said  : 

"From  an  off-hand  inspection  of  the  rates,  jt  is  apparent  that 
it  will  work  out  to  very  considerable  increases  all  around." 

After  making  comparisons  between  present  and  proposed  long 
distance  rates  to  several  points,  the  Free  Press  says : 

"Taking  into  consideration  these  facts,  together  with  the 
reductions  of  the  limit  for  conversation,  and  the  doubling,  in 
some  cases  almost  the  trebling,  of  the  night  rates,  it  is  quite 
apparent  that  the  cost  of  long  distance  telephoning  will  be  just 
about  doubled  in  the  community-" 

In  the  following  table  the  schedule  presented  by  the  Govern- 
ment when  the  proposition  for  government  ownership  was  before 
the  electors,  the  Bell  long  distance  rates,  and  the  proposed 
government  rates  are  compared: 


Winnipeg  to —  Miles 

Eli   31 

Morris    42 

High  Bluff   48 

Dominion  City   . .     56 

Emerson   66 

Macgregor    77 

Darlingford    94 

Cypress    95 

Pleasant  Point  . .   100 

Hallsboro    Ill 

Lariviere 113 

Douglas   121 

Eden    131 

Kenney    141 

Elgin   168 

Whitewater   192 

In  a  public  interview  given  by  the  Chairman  of  the  Telephone 
Commission  to  the  Winnipeg  Tribune,  November  4th,  1911,  he 
said :  "The  loss  to  the  Government  under  the  present  system  has 
been  nearly  $150,000  in  the  past  year."  "Further  no  provision 


Gov't  Revised 

Schedule  Now 

Bell 

Gov't  Rates 

in  Effect 

Rates      . 
3  minutes 

Promised 
3  minutes 

Computed 
3  minutes 

$  .30 

$  .10 

$  .35 

.40 

.15 

.35 

.50 

.15 

.35 

.50 

.20 

.45 

.50 

.25 

.45 

.50 

.25 

.60 

.60 

.35 

.60 

.60 

.35 

.60 

.75 

.35 

.75 

.75 

.40 

.75 

.75 

.40 

.75 

.75 

.40 

.75 

.75 

.75 

.90 

.90 

.50 

.90 

1.05 

.60 

1.05 

1.20 

.65 

not  quoted 

196  GOVERNMENT    OWNERSHIP    OF 

has  been  made  for  depreciation."  "This  loss  in  value  in  spite  of 
repairs  should  be  placed  at  eight  per  cent." — Winnipeg  Tribune, 
November  4th,  1911. 

Australia.     Report  of  the   Royal  Commission  on  Postal 
Service,  September  30,  1910. 

Accepting  the  most  liberal  reading  .  .  .  the  estimated 
loss  on  the  transaction  of  the  Department  from  the  inception  of 
the  Commonwealth  to  3Oth  June,  1909,  amounted  to  at  least 
£2,300,000. 

The  information  furnished  would  make  it  appear  certain  that 
the  postal  section  of  the  Department  returns  a  profit  as  a  whole 
but  the  extent  of  such  profit  was  not  ascertainable. 

Your  Commissioners  therefore  conclude  that  the  Department's 
unsound  financial  position  is  due  to  the  fact  that  telegraphic  and 
telephonic  services  are  rendered  at  rates  which  do  not  return 
revenue  sufficient  to  cover  all  charges  against  capital  account, 
and  working  expenses. 

Consequently  the  postal  section  of  the  Department  has  to 
assist  in  carrying  the  financial  burden  of  the  telegraph  and  tele- 
phone sections.  This  is  distinctly  inequitable,  and  the  result  is 
that  the  mail  facilities  to  outlying  districts  suffer  curtailment, 
while  telegraphic  and  telephonic  facilities  are  furnished  at  a  loss. 

Your  Commissioners  endeavored  to  obtain  the  above  men- 
tioned information  with  the  object  of  definitely  establishing  which 
were  paying  and  which  were  non-paying  branches  of  the  Depart- 
ment, and  of  showing  the  relative  extent  to  which  they  were 
paying  or  non-paying.  The  Accountant  in  New  South  Wales 
estimated  the  cost  of  earning  £i  of  revenue  to  be  as  follows: 

Postal  service £0     14     10 

Telegraph  service 9       6 

Telephone  service 1       5      0 

The  only  other  information  on  this  subject  was  supplied  by  the 
South  Australian  representative  of  the  Commonwealth  Auditor- 
General,  who  had  for  many  years  been  associated  with  the 
Account  Branch  in  New  South  Wales.  This  witness's  estimate 
of  the  cost  of  obtaining  £i  of  revenue  in  South  Australia  was 
as  follows : 

Postal  service  £0     15     10 

Telegraph  service   

Telephone  service 1      3      Z 


TELEGRAPH   AND   TELEPHONE  197 

In  addition  to  the  figures  quoted,  the  Chief  Electrical 
Engineer  stated  that  to  obtain  £i  of  revenue  from  the  telephone 
service  involved  an  expenditure  of  £i  7s.,  exclusive  of  sinking 
fund. 

Ecuador.  Official  Report  of  the  Minister  of  Public  Instruction, 
Post  and  Telegraphs,  1911-12.  p.  26.  (Translation.) 

To  be  perfectly  candid,  I  can  do  no  less  than  state  in  this 
report,  that  the  accounting  of  the  telegraph  branch  still  suffers 
from  "routine-ism"  and  really  woeful  inefficiency.  And  without 
proper  accounting,  it  is  difficult  to  exercise  any  control,  or  to 
make  just  criticism.  The  result  is,  that  in  a  service  whose 
income  should  suffice  to  meet  its  needs  and  to  yield  an  assured 
profit  to  the  exchequer,  there  occurs,  year  after  year,  a  greater 
and  greater  deficit,  as  can  be  proved  by  simply  making  a 
comparative  analysis  of  figures  and  dates. 

Limiting  myself  to  the  year  with  which  this  report  is 
concerned,  the  financial  standing  of  the  telegraphs  for  the  last 
six  months  of  191 1  was,  approximately,  as  follows: 

Receipts     SI.     169.586,62     ($  82,588.68) 

Expenditures    SI.     230.486,17     ($112,246.76) 


Deficit     SI.       60.899,55     ($  29,658.08) 

In  the  first  six  months  of  this  year  the  revenue  and  expendi- 
tures were  as  follows : 

Receipts     SI.     139.804,63     ($  68,084.85) 

Expenditures     SI.     221.650,28     ($107,943.68) 


Deficit     SI.       81.845,65     ($  39,858.83) 

Spain.    Telegraph  Statistics  for  1911,  Published  in  Le  Journal 
Telegraphique  (Berne,  Switzerland),  May  25,  1913. 

Total  receipts   Fr.     10,622,159     ($2,124,432) 

Total   expenses    Fr.     12,153,718     ($2,430,743) 


Deficit     Fr.       1,531,559     ($    306,311) 

Switzerland.     Message  of  the  Swiss  Federal  Council  to  the 
Federal  Assembly,  December  20,  1909.  (Translation.) 

It  has  been  shown  that  the  average  receipt  from  a  domestic 
telegram  (65.7  centimes)  is  considerably  below  the  cost  price, 
which,  for  all  kinds  of  telegrams,  may  be  placed  at  74.5  centimes, 
and  this  proportion  grows  worse,  if  we  make  a  direct  comparison 

16 


198  GOVERNMENT   OWNERSHIP    OF 

of  the  average  revenue,  with  the  cost  price  of  a  domestic 
telegram  only,  which  is  at  least  80  centimes.  It  is,  therefore,  out 
of  the  question  to  listen  to  requests  for  a  reduction  of  the  rate 
for  a  domestic  telegram,  unless  we  desire  to  increase  the  existing 
loss. 

Some  Facts  in  Regard  to  Municipal  Ownership,  p.  5. 

Compiled  by  Citizens  and  Taxpayers  Information  League. 

The  experience  of  France  with  government  ownership  has 
been  so  notoriously  unfortunate  that  even  the  French  Government 
has  been  forced  to  admit  its  incompetence  in  handling  its  various 
enterprises.  In  the  report  of  the  Committee  of  Finance 
appointed  by  the  Senate  to  examine  the  Postal  and  Telegraph 
Budget  for  the  year  1910,  we  find  the  following  frank 
acknowledgment : 

The  failure  to  conduct  the  postal  telegraph  and  telephone  service  of 
France  upon  commercial  principles  is  the  real  cause  of  the  inefficiency  and 
backwardness  of  the  department.  The  absence  of  commercial  principles  is 
especially  emphasized  in  the  preparation  of  the  annual  budgets,  and  the 
situation  cannot  improve  unless  the  Administration  resolutely  breaks  away 
from  these  antiquated  methods. 

For  many  years  the  operating  plant,  especially  the  telephone  apparatus, 
has  not  kept  pace  with  the  progress  of  the  art,  and  local  service  has  been 
neglected.  It  is  also  true  that  as  soon  as  the  Administration  .  .  .  was 
in  a  position  to  obtain  large  appropriations  from  Parliament,  the  money 
was  spent  recklessly,  the  department  being  then  as  lavish  in  expenditure  as 
it  had  been  penurious  in  former  years. 

A  careful  study  of  the  present  budget,  and  of  many  preceding  ones, 
proves  that  the  inefficiency  of  the  service  is  not  due  to  isolated  faults,  but 
to  the  continued  use  of  bad  methods  which  must  be  eradicated.  Only  too 
frequently  loosely  prepared  budgets  are  placed  before  Parliament;  the  in- 
formation furnished  the  inquirer  is  characterized  by  its  sibylline  briefness; 
certain  questions  remain  unanswered;  various  statements  are  found  to  be 
inaccurate  and  seem  to  impute  to  Parliament  a  large  amount  of  implicit 
trust.  Properly  speaking,  the  Administration  has  no  program  of  work,  but 
only  a  program  of  public  credits,  a  fact  which  was  recognized  by  Messrs. 
Sembat  and  Steeg.  The  main  object  of  the  Administration  in  the  prepara- 
tion of  the  Budget  seems  to  be  to  get  the  largest  possible  appropriations, 
without  knowledge  for  what  purpose  these  funds  shall  ultimately  be  used, 
and  without  any  plan  of  accounting.  Indeed  the  Administration  has  gone 
so  far  as  to  demand  credits  twice  for  the  same  object! 

Passing  from  France  to  Italy,  we  find  the  same  story.  In 
a  pamphlet  printed  in  1910  by  the  Italian  Postal  Telegraph 
Clerks'  Association,  of  which  the  Honorable  Fillippo  Turati, 


TELEGRAPH   AND   TELEPHONE  199 

member    of   the    Italian    Parliament,    is    President,    the    Italian 
Government  Service  is  characterized  as  follows: 

The  service  will  continue  on  its  road  to  ruin,  and  the  country  will 
endure  the  losses  and  the  jests.  The  Ministry  of  the  Post  and  Telegraph 
will  then  perhaps  decide  to  send  its  telegraphic  functionaries  to  Canada 
and  Venezuela  in  order  that  they  .may  learn  there  the  great  progress  of 
the  science. 

Even  the  foreign  press  has  occupied  itself  with  this  problem,  laughing 
at  us  merrily. 

New  York  Telephone  Company. 

Some   Facts    Regarding  Government   Ownership   of   Tele- 
phones, p.  56. 
Some  Examples  of  European  Long  Distance  Service 

The  kind  of  long  distance  service  generally  furnished  by 
European  countries  would  never  be  tolerated  by  Americans. 

The  average  time  to  get  a  connection  between  London  and 
Paris  is  one  hour. 

The  average  time  to  get  a  connection  between  Dusseldorf  and 
Berlin  (400  miles)  is  1^2  hours. 

The  Chamber  of  Commerce  of  Alais  (France)  complains  that 
it  is  impossible  to  obtain  telephone  connection  with  Marseilles 
(85  miles)  and  Lyons  (115  miles)  even  after  waiting  four  hours. 

If  the  city  of  Chambery  wants  to  reach  Paris,  the  connection 
is  made  the  day  after  the  call  has  been  filed. 

A  Parisian  wishing  to  make  an  important  toll  call  to  Saint- 
Malo  recently,  rose  early  in  the  morning  to  get  a  good  position 
on  the  "appointment  list."  The  operator  told  him  he  would  have 
to  wait  13  hours  and  10  minutes  to  be  put  through — about  the 
same  time  it  takes  to  make  the  journey  to  Saint-Malo  and  back 
on  the  railroad. 

Aviator  Gilbert,  last  September,  flew  TOO  miles  from  Paris  to 
Rheims  in  55  minutes.  He  arrived  at  his  destination  before  the 
news  of  his  departure  could  be  telephoned. 

France.  Official  Report  on  the  Budget  for  Posts  and 

Telegraphs,  1908,  pp.  11-13. 

Joseph  Noulens. 

Despite  the  diversity  of  its  operations,  the  Postal,  Telegraph 
and  Telephone  Administration  has  not  known  how,  or  has  not 


200  GOVERNMENT    OWNERSHIP    OF 

desired,  to  apply  the  principle  of  specialization  of  work,  of  which 
modern  industry  has  given  examples  and  demonstrated  the  ad- 
vantages. 

The  officials  of  the  Rue  de  Crenelle,  who  are  so  wise  in  giving 
instructions  to  the  operating  departments,  are  very  stupid  in 
their  own  methods. 

The  administration  starts  with  the  principle  that  any  employee 
within  the  service  is  able,  at  any  time,  to  fill  any  position  in 
the  three  services,  postal,  telephone  and  telegraph,  which  it 
operates. 

This  employee,  whose  ingenuity,  if  not  his  knowledge,  must 
be  so  varied,  has  received,  as  we  have  said  before,  no  previous 
training  for  this  work.  He  will  become  proficient  at  the  expense 
of  the  public.  We  need  not  be  astonished,  therefore,  that  our 
letters  do  not  reach  their  destination  until  after  several  days' 
journey,  that  our  telegrams  are  distorted  and  incomprehensible, 
that  our  telephone  connections  are  made  at  random. 

The  most  justifiable  complaints,  which  would  entail  serious 
consequences  for  any  other  than  a  state  enterprise,  receive  no 
other  attention  than  an  answer  in  stereotyped  form :  the  error 
is  due  to  a  mistake  in  the  service,  and  has  been  punished  by  a 
disciplinary  measure.  The  really  imprudent  mistake  consists 
in  employing  a  staff  which  is  not  prepared  for  its  task  and  of 
which,  in  the  course  of  time,  only  a  small  portion  will  be  capable 
of  meeting  the  varied  needs  of  the  services. 

This  method  of  procedure  certainly  makes  the  task  of  the 
central  administration  extremely  easy;  the  first  name  on  the  list 
is  selected  for  the  first  vacancy  to  be  filled;  the  public,  the  em- 
ployee and  his  colleagues  must  make  the  best  they  can  of  it. 
The  vacancy  is  filled,  the  duty  of  the  central  administration  is 
done. 

A  clerk  who  has  sorted  letters  in  an  office  for  ten  years  is 
appointed  head  clerk  in  the  telegraph  or  telephone  service;  he 
will  be  intrusted  with  the  direction  of  services  which,  up  to  then, 
had  been  totally  strange  to  him;  his  duty  will  consist  in  super- 
vising a  staff  of  operators  though  he  is  ignorant  of  the  manipu- 
lation of  the  modern  instruments,  and  sometimes  of  all  the 
instruments. 

We  find  the  same  errors  committed  in  every  branch  of  the 
administration.  Upon  returning  from  his  military  service,  a 


TELEGRAPH   AND   TELEPHONE  201 

young  letter  carrier,  who  delivered  pneumatics  (special  delivery 
letters,  sent  through  pneumatic  tubes)  with  the  speed  to  which 
we  are  accustomed,  is  appointed  to  repair  wires  on  roofs.  In  his 
new  position  his  inexperience  exposes  him  to  the  risk  of  a  fatal 
fall,  unless  he  waits  for  a  workman  to  come  and  do  his  work 
for  him;  in  that  case  the  only  victim  is  the  subscriber,  who  is 
used  to  patient  waiting. 

A  clerk  who  has  been  occupied  for  fifteen  years  in  directing 
deliveries  of  mails  or  in  marking  postal  savings-bank  pass  books 
is  promoted  to  the  position  of  inspector  of  the  technical  service, 
and  in  this  capacity  is  charged  with  constructing  lines,  perform- 
ing electrical  work,  etc.,  all  things  which  he  has  never  heard 
of  before,  things  he  will  neglect  or  do  badly.  He  will  prefer 
to  confine  himself  to  clerical  work  which  will  be  as  nearly  as 
possible  like  the  work  he  was  in  the  habit  of  doing. 

Westerly  (R.  I.)  Sun,  November  18,  1906.    (Quoted  in  Mu- 
nicipal Ownership,  February  8,  1907.    New  York.) 

New  Zealand  Has  Few  Telephones. 

Has  Been  Called  the  Industrial  Paradise  of  the  World  — 
Telephone  System  Does  not  Denote  That 

The  commonwealth  of  New  Zealand  has  sometimes  been  pro- 
claimed as  an  industrial  paradise,  a  socialistic  state  in  which 
all  the  problems  that  have  arisen  to  vex  humanity  in  the  evolu- 
tion of  the  race  are  being  settled.  A  practically  homogeneous 
population,  newly  settled  in  an  astonishingly  fertile  group  of 
islands,  has  prospered  as  Anglo-Saxons  are  apt  to  prosper  in 
such  circumstances ;  hence  a  disposition  among  many  writers  to 
attribute  the  success  of  the  colony  to  its  forms  of  social  organ- 
ization. 

In  one  important  respect,  however — and  those  most  familiar 
with  the  local  situation  assert  that  there  are  many  other  respects — 
this  Utopia  of  the  South  Seas  is  still  far  behind  the  times.  The 
telephone  utility,  which  is  doing  so  much  to  unify  the  entire 
continent  of  North  America,  is  in  a  very  backward  state  in  the 
government  ridden  British  colony  off  the  Australian  coast.  In 
the  entire  archipelago  of  New  Zealand,  with  a  population  in 
excess  of  800,000,  the  actual  number  of  telephone  stations  of  all 


202  GOVERNMENT   OWNERSHIP   OF 

kinds  was,  on  March  31,  1905,  the  latest  date  for  which  figures  are 
available,  but  13,423,  as  against  12,105  twelve  months  before  that. 
In  other  words,  this  dominion  with  an  area  of  104,471  square 
miles  and  a  population  equal  to  that  of  the  combined  states  of 
New  Mexico,  Delaware,  Idaho,  Arizona,  Wyoming  and  Nevada, 
has  fewer  telephones  than  are  to  be  found  in  the  city  of  Seattle 
which  has  about  one  tenth  the  population.  New  York  City 
alone,  with  about  five  times  as  many  people  as  the  socialistic 
commonwealth,  has  about  twenty  times  as  many  telephones. 
The  old-fashioned  grounded  circuits  are  used  everywhere  in 
New  Zealand  except  at  the  few  principal  exchanges  in  Auckland, 
Wellington,  Christchurch  and  Dundin. 

The  telephone  in  New  Zealand  is,  in  fact,  still  a  local  utility. 
The  districts  are  carefully  defined,  though  they  may  overlap,  and 
after  regular  hours  speech  is  permitted  from  an  office  in  one 
district  to  an  office  in  another,  where  practicable!  Most  of  the 
arrangements  for  handling  the  traffic  appear  to  the  American 
as  equally  primitive.  No  such  conception  as  engineers  trained 
in  the  Bell  companies  of  the  United  States  have  of  a  universal 
convenience  making  it  possible  for  everybody  to  communicate 
with  everybody  else,  however  distant,  has  ever  arisen  in  the 
republic  at  the  antipodes.  Yet  there  are  great  distances  which 
might  be  telephonically  traversed  and  which  undoubtedly  would 
be  so  traversed  under  American  management.  Thus  from  Auck- 
land to  Wellington,  the  two  most  important  centers,  it  is  nearly 
500  miles.  Yet  you  cannot  telephone  between  these  two  cities. 

Much  red  tape  is  involved  in  subscribing  to  the  governmental 
telephone  service.  A  formal  application  has  to  be  made  and  an 
entrance  fee  of  one  pound  is  exacted  before  an  application  will 
be  considered.  The  intending  subscriber  may  not  live  more  than 
three  miles  from  an  exchange.  The  rates,  considering  the 
number  of  persons  with  whom  communication  is  possible, — 
and  obviously  the  value  of  a  telephone  increases  with  the  number 
of  subscribers  who  can  be  reached  by  it, — are  by  no  means  low 
as  compared  with  those  of  the  Bell  system  in  the  United  States. 
Thus  business  establishments  pay  $34.09,  private  residences  $24.35, 
rates  which,  considering  the  differences  in  the  general  scale  of 
living  between  the  two  countries,  are  fully  equal  to  those  charged 
in  the  smaller  communities  of  this  country,  where  the  subscriber 
gets  for  his  money  direct  communication  with  as  many  or  more 


TELEGRAPH   AND   TELEPHONE 


203 


people  than  he  would  in  a  New  Zealand  city.  The  exchanges, 
furthermore,  are  not  open  at  all  hours  of  the  day  except  in  the 
largest  places.  In  districts  where  there  are  less  than  65  sub- 
scribers the  hours  of  telephoning  are  from  9  a.  m.  to  5  p.  m. ; 
over  65  and  up  to  100,  8  a.  m.  to  8  p.  m. ;  100  to  125,  8  a.  m.  to 
10  p.  m. ;  125  to  150,  8  a.  m.  to  midnight;  over  150,  open  continu- 
ously if  desired  by  subscribers. 

New  Zealand.    Postmaster  General's  Report  (summarized 
financial  statements). 

The  net  results  shown  below,  it  will  be  noted,  are  exclusive 
of  interest  charges,  which,  if  taken  into  account,  would  ma- 
terially increase  the  deficits  shown. 


Gross 
telegraph 

Total 
telegraph 

and 

Total 

and 

telephone 

Value 

value  of 

telephone 

Official    net    profit 

toll  rev. 

of 

telegraph 

toll  ex- 

(excluding interest 

Year 

(includ. 

Govern- 

and 

penditure 

charges)  of  the  com- 

ended 

miscel- 

ment 

telephone 

(,excl.    in- 

bined telegraph  and 

March 

laneous 

mes- 

toll 

terest 

telephone     toll    ser- 

3-T- 

rev.) 

sages. 

business. 

charges.) 

vices. 

£ 

£ 

£ 

£ 

£                          $ 

1908 

227,398 

4,499 

2-31,  .  <S7 

275,757 

_  43,860        —  213,160 

1909 

238,104 

4,821 

242,9^5 

307,166 

—  64,241        —  312,211 

1910 

250,212 

4,851 

255,063 

322,485 

_  67,422        —  327,671 

1911 

272,943 

4,874 

277,817 

344,046 

—  66,229        —  321,873 

1912 

295,334 

4,832 

300,166 

364,613 

—  64,447        —  313,212 

Totals     1,283,991      23,877     1,307,868     1,614,067        —306,199       —1,488,127 


Union  of  South  Africa.     Report  of  the  Postmaster  General, 

1910. 

Although  every  effort  has  been  made  to  reduce  expenditure, 
there  is  little  prospect  of  the  Telegraph  Department  paying  its 
way.  The  Reports  of  all  the  Provinces  prior  to  Union  showed 
losses  in  working,  the  amount  in  the  Cape  Colony  and  Transvaal 
being  at  the  rate  of  £37,000  and  £34,052  per  annum,  respectively. 

The  general  position  of  the  Telephone  Account  of  the  Union 
for  the  calendar  year  1910,  was : — 

Capital  Expenditure £893,239 

Revenue,    1910    167,271 

Expenditure,  1910,  including  interest  and  depreciation 189,049 

Deficit 21,778 


204  TELEGRAPH   AND   TELEPHONE 

Union  of  South  Africa.     Report  of  the  Postmaster  General, 
1911.     p.  12. 

After  debiting  the  telegraph  account  with  all  direct  charges 
incurred  and  a  proportionate  share  of  the  cost  of  administration 
and  other  general  expenditure,  and,  on  the  credit  side,  including 
the  value  of  work  undertaken  free  of  charge  for  other  govern- 
ment departments  and  of  the  concession  represented  by  the  re- 
duced rates  to  the  railway,  it  is  found  that  the  working  of  the 
Telegraphs  of  the  Union  resulted  in  a  deficit  for  the  year  of 
over  £60,000. 

Union   of   South  Africa.    Telegraph   Statistics   for    191 1    re-      l| 
printed  in   Le   Journal   Telegraphique    (Berne,   Switzer- 
land), May  25,  1913. 

Total   receipts    Fr.     8,271,900     ($1,654,380) 

Total  expenses   Fr.     9,530,588     ($1,906,118) 


Deficit    Fr.     1,258,688     ($    251,738) 


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